Sunday, September 2, 2012

Factors That Influence Your Credit Score

Rock-bottom mortgage rates entice homeowners to refinance, but many borrowers are surprised to find that the advertised mortgage rate is not necessarily the refinance rate they will be offered. In fact, mortgage rates for a refi on any given day can vary by as much as a full percentage point or more, depending on various factors.
A mortgage rate sheet looks like a menu, and there's a grid of available rates we see each day. There are lots of things that influence an individual's mortgage (refinance) rate, including whether or not they pay points.
Paying one point, equal to 1 percent of the loan amount, typically lowers the mortgage rate by one-quarter of a percentage point.
Most advertisements for low mortgage rates show the rate with one or more points. Loans with points aren't always the best way to go because of the rarity of actually recouping the money. Most borrowers refinance again or sell before they reach the break-even point from purchasing points.
Here are other factors that can influence your mortgage refinance rate.

Credit score

Generally, the lower your credit score, the higher your refinance rate will be, according to the senior vice president with Wells Fargo Home Mortgage near Chicago.
Many consumers don't realize what a big impact their credit score has on their refinance rate. For example, a credit score of 695 is pretty decent and we don't generally think of that as a bad score. But borrowers with that credit score can pay as much as three-eighths or one-half a percentage point higher on their mortgage rate compared to someone with a credit score above 760.

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