Washington Post Doesn’t Understand Credit Scores

The Washington Post is alleging that Senator Obama received a special “discount” when he purchased his home in 2005. This is what is being reported:

He locked in an interest rate of 5.625 percent on the 30-year fixed-rate mortgage, below the average for such loans at the time in Chicago. The loan was unusually large, known in banker lingo as a “super super jumbo.” Obama paid no origination fee or discount points, as some consumers do to reduce their interest rates.

The article discloses the income of the Senator and the property type. Obviously this would have been a full documentation loan disclosing assets on a super-super Jumbo loan.

However, the article fails to mention one very important aspect of interest rates. The senators FICO score. This makes a big difference. The article states that the average loan rate for a similar program was 5.94 percent. So, supposedly he received a 30 basis point “discount”. Well considering the average credit score in Illinois is 684, if the Senators FICO score was well above 720+ then a 30 basis point difference is well within the range. So, I don’t understand why the Post is making such a big deal about a $300/month savings for a higher credit score borrower. They obviously don’t read my blog otherwise they would have read about the four corners of a mortgage.

Based on some of what I have read about the Senator, for example he has no revolving credit card debt and he’s lived frugally all his life, I have a hard time believing that he would have a below average credit score. This is pure speculation on my part and I have nothing to back it up. However, I am willing to give him the benefit of the doubt on this.

I will reveal one thing on what I think about Senator Obama. Even though I disagree with most of his political platform, I like him. I still admire him and have a lot of respect for him. He’s a decent man, and an all American success story.  I know he’s also a politician, but from what I have seen so far (especially after all these years of the Clinton and Bush slime machines) I believe when it comes to character he’s heads and shoulders above both of them.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.