FNMA has a funky matrix table to determine loan pricing. The best rate possible is for a loan below 60% of the value and a mid credit score above 700.
The rate is the same for a 25% LTV loan with a 800 score.
If you score is 620-699 the same loan will cost .25% more at origination,(not in rate)
At 80% of the value, you need a 740+ score for the best rate. A 739 score will cost .25% more.
There are various combinations in between, based on credit score and LTV.
These are FNMA guidelines that everyone has in pricing a loan.
On a $400K loan @ 80%, a borrower with a 639 score would have to pay $11,000 up front to get the same rate as a borrower with a 740 score gets at no extra cost. Another option is to take a rate about 2 points higher instead.
What nobody understands is how buydowns are priced.
There is no set formula. 5 different lenders can all have different buydown costs at different rates.
Different wholesale lenders have different rates as well, some are consistently higher.
A lender who has the best par rate is not the same lender that offers the best buydown rates.
Not every broker has access to every lender.
The best lenders dont want to deal with shady brokers. These brokers end up only having access to lenders with higher rates. When they tell you it’s the best rate that they have, it usually isn’t the best rate available.
In the last 2 days, I had 30YR fixed with a small buydown at 4.875% and 5.00% was available with a .50% cost yesterday, but only for about an hour.
In the last 2 days, rates were the lowest that they have ever been in history. Rates moved up to 5.25% by the end of the day. They really do move that fast. HLS
