Two days before we were closing Erika’s mortgage, the lender ran a new credit report and her scores dropped 100 points, from 760 to 660, because of the drop in scores, instead of getting a 3.125%, 15 year conventional loan, her rate would have to be increased to 3.5%.
I recommended that we convert the loan to an FHA loan. Even though there was a 1.75% mortgage insurance premium added to the principal balance, we had to do an FHA appraisal and it would take more time before we close, these were the negatives. The positive was that her interest rate was 2.875%.
Her monthly payment ended up being almost identical, so in this case it made sense to make the switch instead of paying a higher monthly payment.
Our responsibility is to make sure that our clients end up with the best possible result, no matter how much extra time it takes. It is all about the math, if it is in the best financial interest to switch loan products, then that is what needs to be done.
By: Rosemary Rugnett