What Interest Rate Do I Qualify For?

Banks lend money so they can collect interest and make a profit. But banks only lend money to those who are likely to pay them back, a term known as creditworthiness. To determine creditworthiness, banks sort people into risk-buckets based on their credit scores and how much they want to borrow, a term called Loan-to-Value (LTV).

Your credit score (FICO) is reported by Transunion, Credit Plus and Equifax as a number between 500-800, and banks use your median credit score to determine your risk-bucket. For every 20 points of increase to your credit score, you potentially qualify for a lower interest rate:

When two borrowers apply for a loan together, the bank uses the lowest median credit score of the two borrowers.

Borrower-1 credit scores:

• Credit Plus: 710

• Transunion: 715

• Equifax: 740

Borrower-2 credit scores:

• Transunion: 655

• Equifax: 670

• Credit Plus: 700

In the above example, the bank will use Borrower-2’s median score of 670 to determine the risk-bucket for this loan. Unfortunately interest rates are higher for the 670-bucket than for Borrower-1’s 715-bucket.  

The second factor that determines your risk-bucket is Loan-to-Value (LTV). To calculate your LTV, divide your desired loan amount by the appraised value of your home.

The lower your LTV, the better interest rate you qualify for.

As seen on the chart below, homeowners who receive the lowest interest rates are those with a low LTV and a credit scores above 740.

Call to find out if you qualify for a lower interest rate and start saving money!

Toll Free: 844.746.4274

Email: inquiries@asislending.com