Q. Does my credit score affect the interest rate I get on a loan? My credit score is 736, 710 and 715 from three major credit reporting companies. I am purchasing a new house and was offered a 30-year fixed-rate mortgage for 6.626% no points.
A. Your interest rate does depend on your credit score and your scores are pretty good. You should be able to qualify for rate that is much lower than 6.625% -- and rates are going down right now.
If it’s not too late, we suggest you check mortgage rates in your area and see if you can get a lower rate. We think you can. The quickest way to do that is to go to use the rate search at the top of our mortgage page. Just fill in your city and state or zip code, answer the questions about the type of loan you want and check out the lenders and rates available in your area.
Q. Back in 1994 I sold a house in New York to my sister and her husband for $50,000. I had a lawyer draw up legal documents with a payment schedule for the next 20 years at 9.31% interest. My sister now says she’s paid me over $55,000 and doesn't want to tgive me anymore. Was that a reasonable interest rate for the time and what should I do if she and her husband default on future payments?
A. A rate of 9.31% was a little high. Average rates in the New York City area for a 30-year fixed-rate mortgage were about 7.36% on March 1, 1994. But rates did climb to 7.99% by the end of March and to more than 9% by the end of the year.
But we don't think rates are the problem here. You didn't mention how much your sister is paying each month, but if your contract was structured like a traditional mortgage she should have been giving you $460 a month in principal and interest.
If she did this, assuming the payments started March 1, 1994, she will have paid you $46,538 in interest and $18,304 in principal. Your sister would still owe $31,696.
What she must understand is that in the first several years of any mortgage most of the monthly payments go toward interest. That gradually changes, and in fact some time next year the balance will shift so that more of the monthly payment will be applied to the balance than to the interest.
Your sister claims to have paid over $55,000 on the loan, but this is lot less than the $64,843 she should have paid, and would have paid, by now with a commercial mortgage.
A mortgage is a legal document and you have every right to be paid in full, according to the terms of the mortgage. She could pay the balance of $31,695 and avoid paying more interest. If she defaults on her payments, you could get your house back.
We suggest that you consult a good real estate lawyer if your sister stops making the payments.
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