Arizona Mortgage Guru » 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.

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Tags: credit scores, Mortgages, senator obama
Categories: Credit Scores, Interest Rate, Mortgages

4 Responses to “Washington Post Doesn’t Understand Credit Scores”

Heather Barr wrote a comment on July 6, 2008, 6:24, pm

Thank you for pointing this out! In all the recent headlines about politicians receiving discounted mortgage rates, not one of the stories (so far) bothers to mention that the politician’s excellent credit scores might have EARNED them a healthy discount off the street rates and that this is perfectly legal, reasonable and ethical. What happened to good reporting? I guess it’s just easier for a journalist to imply a scandal than delve into the mysteries of the credit score.

Shailesh Ghimire wrote a comment on July 8, 2008, 7:15, am

Heather,

No problem. I just thought it was kind of unfair for reporters to make a case for scandal and not fully understand the issue. I agree. I think the rush to find something “ugly” is so high that quality is sacrificed at times.

As always, as a blogger, I’m always happy to point out the follies in traditional media when it comes out!

Chris Butterworth wrote a comment on July 8, 2008, 10:51, am

Here here, Shailesh.

It’s not so much the follies, but it seems that the majority of print media and talking heads are more concerned with sales, ratings, and agenda, than they are with the truth or the full story. I find myself reading BusinessWeek magazine less and less, because their headlines don’t always match their stories, and their stories often have flaws similar to what you’ve described here.

We (bloggers) all know it’s not that hard to tell the whole story, or to disclose missing pieces, or to disclose your agenda. I guess sometimes the full truth gets in the way of a good story…

Mark T. wrote a comment on July 11, 2008, 7:02, am

This is useful information and I appreciate your comments on understanding the importance of having a good credit score as I am sure Senator Obama does. I enjoy your site and gave you a link from my real estate community guide site at http://www.arizonacommunityguide.com, as I am looking for active mortgage information to be on the site.