Posted by: kvan in refinance, mortgage, FICO, application, account information on Nov 26, 2008
This week I started shopping around for a mortgage to refinance my rental property. I had originally purchased this property using a home equity line of credit (HELOC) on my primary home. So the plan is to refinance the rental property and pay off the HELOC. I had planned on waiting until working my FICO score back up above 700, thinking that would make a significant impact on loan terms. As of now, my FICO score as reported by Equifax is 696. With the recent drop in mortgage interest rates, I want to be sure to be ready, so I began shopping around. I checked a number of locations, including my local credit union, my insurance company (USAA, which also has a banking, credit card, and mortgage business), and the company I've used for my last two home refinances, www.internetmortgage.com, which is actually Bank of Blue Valley (BBV) out of Overland, Kansas. My credit union (Ent Federal Credit Union) had the best application process I've seen. If you're like me, you get frustrated typing account information, knowing the bank pulls all that information from the credit reporting agencies anyway. Well, Ent pulls the information right into the application, after confirming that its OK to check credit. Very refreshing.
The best rate and terms I recieved came from BBV, so I decided to go with them. This is my third refinance with them, so I've grown comfortable working with an out-of-state bank, if the price is right. And this is the third time that the price was right. I locked in at 5 7/8 with 2 points, which is surprisingly good for an investment property.
I was very curious about the impact of my FICO score. My thought was that I'd wait a while and work my FICO up, if that would make a significant difference in terms. I asked my loan officer to run a quote with a FICO score of 720. I figured I could hit a 720 with a few more months of paying down my debt. It turns out that going from 696 to 720 would have no effect on the rate, so I decided to go ahead and lock in and get this refinance done. I believe if I had a much higher FICO score, say above 750, that rates would be lower. I think I'll achieve that score some time over the next couple years. But with interest rates at historical lows, I don't want to risk waiting a long time just to save a couple tenths of a percent. Its much better to lock in now.
My refinance loan should close some time in mid-December, and I plan to apply 6-8 thousand in debt paydown once the funds comes through.