Buying and financing a new home can be a daunting task and many of us turn to friends and family for advice. Watch out for mortgage myths. The only experts in the mortgage field….are the experts in the mortgage field! Friends and family might not be the experts they think they are. The mortgage guidelines and interest rates are changing so frequently that unless someone is in the mortgage field as a full-time job, you should only take advice from a mortgage professional.
Blog Category: credit score
A Credit Score Simulator can help with “What If” scenarios to determine what you could potentially do to raise your credit score. It can also show you what could negatively impact your credit score. It is important to see how your credit choices might affect your credit score because your credit score will impact the underwriting of your loan, your interest rate quote, and even the cost of your mortgage insurance.
Are your credit scores falling? Don’t let your credit score fall down. There are many current homeowners who can afford their mortgage, but are upset that their home is not worth what it once was. These people are called “strategic defaulters”. But walking away from a mortgage, especially one you can afford, is a bad idea.
The latest minimum credit scores are simple for an FHA loan. If you have at least a 620 credit score, you can get an FHA loan.
With Conventional loans, a 720 credit score is preferable. You may get a loan with a lower credit score, but it would cost more points (i.e. an “add-on”).
There are complicated matrices used on Conventional loans and those may show that a lower credit score can still get a Conventional loan, but trust that if you are going for a Conventional loan its best to have a 720 credit score.
If you’ve looked up your credit score on your own before then you know your score, right? Well, you may not know your accurate score. You may only know one score instead of all three. Mortgage lenders use all three scores, one from each of the large national credit bureaus. These are Equifax, TransUnion and Experian. So if you see a 741 score on a consumer credit report you pull, a mortgage lender may see a 698, a 723, and a 741. And the mortgage lenders use the middle credit score, or the 723. That may cause a change in the terms that are being quoted to you.
Problems With Your Credit Score? It seems all banks and all types of loans today require a credit score to get a mortgage. I know of only one bank that still allows what is called “an alternative credit history”, it seems 99% of all banks now mandate the need for a credit score. But there are a few people, very few, who don’t use credit, have not gotten a credit card, and pay cash or write checks for everything. I find these people to be younger, or much older. The younger people still have not considered building a credit history, and some much older people just never used credit or were never comfortable with it.
Mortgage lenders have the potential to improve a mortgage borrower’s credit score. A rapid rescore can improve your credit score. Having an improved credit score can possibly lower your interest rate and/or your Private Mortgage Insurance (PMI) if your loan has PMI. However, improving a credit score is no guarantee of getting lower mortgage terms. Also, improving your credit score may not even be needed. Why? Read on.
The Grinch, which in this story is Fannie Mae, just stole Christmas. I must admit, that is dramatic, and not literally true. But they did potentially just steal your mortgage.
Fannie Mae’s current rules allow an underwriter to exclude revolving debt (i.e. credit card debt) from the debt-to-income (DTI) ratio if there are ten or fewer payments remaining. Fannie Mae will now require all revolving debts to be included in the DTI ratio regardless of
A lender pulls three credit reports to issue a mortgage? Yes, potentially. One when you get pre-qualified. Then another at loan application, if loan application and settlement happens 120 days or more after pre-qualification. And then the third check is just before settlement! Yes, now Fannie Mae, Freddie Mac, FHA, and all the rule makers require lenders to check for credit activity just a day or two prior to settlement.