When you’re in the market to buy a new home or investment property, it’s one thing to get a pre-qualification over the phone and a completely different thing when you later sit down and actually apply for a loan. So before you get too far into the process, you should know which factors could end up inflating the interest rate on your mortgage.

Over at Reuters, they’ve linked to a matrix Fannie Mae [PDF] uses to adjust interest rates on new loans.

Among the biggest risk factors that virtually guarantee an upward adjustment on your interest rate:

* FICO scores below 740: Even a not-horrible score of 700 could add .75% to your rate. The low end of the range (620-639) could add a full 3%.

* 40-year loans: Will add .125% to your interest rate.

* Investment properties: Be prepared to add at least 1.75%.

* Condominiums: Add up to .75%.

* Manufactured homes: That’ll be another .5%.

* Multiple-unit properties: Will have you paying an extra 1%.

From Reuters:

One other side effect of risk-based pricing: The stricter underwriting rules also make it more difficult to qualify for a loan, which is not much help to markets that are swimming in properties and won’t get back on their feet unless demand returns…

If only the mortgage barons had some realistic underwriting standards five years ago. It would have prevented a lot of heartbreak.

What mortgage brokers don’t tell you: Hidden penalties abound [Reuters]

Loan-Level Price Adjustment Matrix [Fannie Mae (PDF)]

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