You may have noticed recently that in the mortgage world, the sky is falling.
Foreclosures are everywhere, people are defaulting, loan modification companies have commercials during prime time because the demand is so high. The news of mortgages being more difficult to get is covered regularly, yet many people are surprised to find that they do not qualify for the lowest rates available due to increasingly strict credit requirements from lenders.
During the heyday of easy mortgages someone with a below average credit score could obtain a loan, including borrowers who’s scores were as low as 500 using the standard FICO model of 350-850 for determining people’s credit worthiness. Now however, Lenders are increasing the credit score requirements. In 2009 Lenders changed the requirements twice from 620 to 640, and within months of the initial change from 640 to 660.
FHA itself has increased its requirements for several popular loan programs such as the FHA Streamline Refinance, which at one time did not require a credit score. Although FHA still will accept borrowers on a purchase as low as a 580, the vast majority of lenders have increased their own requirements to 620 in spite of FHA’s allowance.
While a 620 FICO will allow you to get FHA financing through most lenders, you will not get the best rates available. Lenders have criteria that they consider to be risky, such as lower credit scores or gaps in employment history that will increase the rate you are able to obtain. These are called ‘hits’ to the rate. In order to avoid the rate hit on an FHA mortgage a borrower needs to have a minimum 660 FICO score.
Many people assume that credit help is something that you only need if you have been through Bankruptcy or were irresponsible with your credit in the past, however, it is becoming increasingly common for people who thought they had no credit issues whatsoever to have need of someone who can help them understand the in’s and out’s of the credit laws.
If you are looking to refinance or purchase a home in the near future, obtain a free copy of your credit report and make sure there isn’t anything lurking there that could prevent you from getting a great rate.
One thing that sets Utah Mortgage Team apart is that we will help you get the best rate rather than simply telling you what you qualify for at the time that you talk with us. We don’t care how long it takes…there isn’t any pressure to do a loan or make a decision. We love to see people save money and have better credit in the process. So whether its a quick fix or several months in the making, we can lower your mortgage payment with our credit expertise.
