How Does a Short Sale Affect a Seller’s Credit Anyway?
Posted in Real Estate on 07/10/2010 01:47 am by
Derick Sutton asked:
A foreclosure will greatly affect one’s credit standing. It is believed by many that a short sale will lead to a shorter credit recovery period. Does this mean that a foreclosure damages one’s credit more than a short sale? The truth is that a short sale offers very little advantage over a foreclosure when it comes to preserving your credit standing.
Let’s be clear about it. Although there may not be an advantage in using a short sale instead of entering foreclosure when it comes to preserving credit standing or recovering FICO points sooner, using a short sale does have its advantages.
As of May 31st 2008, Fannie Mae will not allow loans for five long years to those who entered foreclosure. Fannie Mae’s current rules state that it will take two years for you to re-establish credit once you use a short sale to dispose of your property. Two years is not really that long compared to the length of time it will require to get credit once you enter foreclosure. That is a definite advantage of using a short sale instead of entering foreclosure.
Secondly, using a short sale instead of entering foreclosure reduces deficiency judgements significantly. Once a property enters foreclosure, the lender will find a way to liquidate the asset to recover the money it invested. The first try would be through an auction. However, more often than not, the lender will not be happy with the amount offered at an auction and will choose to buy the property back. When that happens, the lender will seek the help of a real estate agent to turn the property into cash.
A foreclosure will greatly affect one’s credit standing. It is believed by many that a short sale will lead to a shorter credit recovery period. Does this mean that a foreclosure damages one’s credit more than a short sale? The truth is that a short sale offers very little advantage over a foreclosure when it comes to preserving your credit standing.
Let’s be clear about it. Although there may not be an advantage in using a short sale instead of entering foreclosure when it comes to preserving credit standing or recovering FICO points sooner, using a short sale does have its advantages.
As of May 31st 2008, Fannie Mae will not allow loans for five long years to those who entered foreclosure. Fannie Mae’s current rules state that it will take two years for you to re-establish credit once you use a short sale to dispose of your property. Two years is not really that long compared to the length of time it will require to get credit once you enter foreclosure. That is a definite advantage of using a short sale instead of entering foreclosure.
Secondly, using a short sale instead of entering foreclosure reduces deficiency judgements significantly. Once a property enters foreclosure, the lender will find a way to liquidate the asset to recover the money it invested. The first try would be through an auction. However, more often than not, the lender will not be happy with the amount offered at an auction and will choose to buy the property back. When that happens, the lender will seek the help of a real estate agent to turn the property into cash.
Steps to Qualify for Las Vegas Home Loans
Posted in Real Estate on 07/05/2010 09:02 pm by
Kent Pinkerton asked:
Thanks to the natural beauty of most real estate properties in the casino capital of the nation, many individuals are becoming more and more interested in qualifying for Las Vegas home loans.
Las Vegas home loans can, after all, make most people’s dreams of owning a house in Las Vegas come true- even if they’re not presently able to pay the full amount of the property. The rates for Las Vegas home loans are certainly lower than what you would expect in, for example, downtown New York, so acquiring a property in Las Vegas is also a good investment.
Here are the steps to help you qualify for a Las Vegas home loan:
Step 1: Know Your FICO Score
There are three major credit bureaus in the country – Equifax, Experian and Trans Union. It’s best to know your credit scores from all three institutions since you don’t know which bureau’s score will be used by the mortgage company you’ll end up doing business with. Some companies even use all three credit ratings by getting their mean score.
You can proceed to step 2 if you have a high FICO score. Anything above 600 is usually acceptable but you need to score higher than 700 if you wish your loan application to enjoy pre-qualified approval. If you have a low FICO score, you need to enlist the services of a credit repair company first before moving on.
Step 2 Compare Rates
If you wish to save more money, you need to do research to find the best home loan rates. Different companies offer different rates, so you need to shop around.
Step 3 House Hunting
Ideally, you should have a house in mind already before you shop for a home loan. But let’s just say that the house’s price is exceeds the amount of money you borrowed. In this case, you have no option but to find a different house that will match both your taste and your budget.
Michele
Thanks to the natural beauty of most real estate properties in the casino capital of the nation, many individuals are becoming more and more interested in qualifying for Las Vegas home loans.
Las Vegas home loans can, after all, make most people’s dreams of owning a house in Las Vegas come true- even if they’re not presently able to pay the full amount of the property. The rates for Las Vegas home loans are certainly lower than what you would expect in, for example, downtown New York, so acquiring a property in Las Vegas is also a good investment.
Here are the steps to help you qualify for a Las Vegas home loan:
Step 1: Know Your FICO Score
There are three major credit bureaus in the country – Equifax, Experian and Trans Union. It’s best to know your credit scores from all three institutions since you don’t know which bureau’s score will be used by the mortgage company you’ll end up doing business with. Some companies even use all three credit ratings by getting their mean score.
You can proceed to step 2 if you have a high FICO score. Anything above 600 is usually acceptable but you need to score higher than 700 if you wish your loan application to enjoy pre-qualified approval. If you have a low FICO score, you need to enlist the services of a credit repair company first before moving on.
Step 2 Compare Rates
If you wish to save more money, you need to do research to find the best home loan rates. Different companies offer different rates, so you need to shop around.
Step 3 House Hunting
Ideally, you should have a house in mind already before you shop for a home loan. But let’s just say that the house’s price is exceeds the amount of money you borrowed. In this case, you have no option but to find a different house that will match both your taste and your budget.
Michele
FHA Streamline Refinance – No Credit Score Needed
Posted in Real Estate on 05/23/2010 09:42 pm by
William Doom asked:
The Traditional and Original FHA Streamline consist of the following:
NO Appraisal NO FICO Score NO Income Verification NO Asset Verification
After reading that there is little to nothing in order to qualify; you are probably asking what’s the catch, or this can’t be real.
First off FHA Streamlines have been around for years.
The Traditional and Original FHA Streamline consist of the following:
NO Appraisal NO FICO Score NO Income Verification NO Asset Verification
After reading that there is little to nothing in order to qualify; you are probably asking what’s the catch, or this can’t be real.
First off FHA Streamlines have been around for years.
The Pros and Cons of 40-Year Fixed Loans
Posted in Real Estate on 04/03/2010 04:54 pm by
Carey Pott asked:
With interest rates going up and property values starting to appreciate at a slower rate or flatten out, a new kind of loan has started to become more popular. The 40-year fixed loan allows you to amortize the loan over a 40-year period instead of the usual 30 years. This results in a lower monthly payment, which can come in handy when rates are higher. There are some pros and cons to this type of mortgage. I will explain why I personally don’t like these loans except in special circumstances.
The main advantage of a 40-year fixed loan is that your monthly payments are lower. Since this loan is typically fully amortized (a small amount of principle is paid down monthly), the loan balance will slowly decrease each month. This is the main advantage of a 40-year fixed loan over an interest-only loan if your goal is to pay down principle. Another advantage is that while most interest-only loans have minimum FICO requirements of approximately 580, a 40-year fixed loan is available if your FICO score is as low as 500.
One of the main cons of getting a 40-year fixed loan is that over the course of 40 years, you end up paying a LOT more interest than a 30-year loan, with a payment difference that is fairly negligible. For example, on a 30-year fixed loan of $300,000 a borrower will end up paying $647,000 in principle and interest over the course of the loan. This is scary enough, but on a 40-year fixed it’s much worse – with the same loan amount the borrower ends up paying $843,000 after 40 years. And the worst part of all is that for the extra $196,000 the borrower ends up paying after 40 years, they end up with a monthly payment that’s only $45 lower!
Another disadvantage of 40-year fixed mortgages is that you end up paying a higher interest rate for the privilege of paying the lender so much more interest. Rates for a 40-year fixed are about 0.5% higher than a comparable 30-year fixed loan. This doesn’t sound like much, but over 40 years it adds up to a significant amount more interest – almost $200,000 in our example above! This is also part of the reason why the monthly payment difference isn’t very big between the two loans – although the payback period is lengthened, the interest rate is higher and the two almost even out.
One last thing that most people, including loan officers, don’t realize about 40-year fixed loans is that most of the time, especially in the sub-prime market, you can’t even keep the loan for 40 years. Most lenders write the loan with a balloon payment, which means that although the mortgage is amortized over 40 years, it’s actually due in full after 30 years. If you’re considering a 40-year fixed loan, make sure your loan officer explains the program to you completely and read the note carefully to make sure you’re getting what you think you’re getting.
As you can see, there are a lot more cons to getting a 40-year fixed mortgage than there are pros. So why would anyone want to get a 40-year fixed? The only time I recommend them is when the monthly payment difference of $50-100 makes a huge difference to you AND you don’t qualify for an interest-only loan. Interest-only loans are a much better way to keep the payments down, but as I mentioned above there are minimum FICO requirements that not everyone can meet. Only in these situations do I recommend 40-year fixed loans.
If you’re considering one of these loans I would highly recommend you look at a 30-year fixed loan instead if you plan on keeping the loan for an extended period of time, or an interest-only loan instead if the lower monthly payments are more important and you qualify. Just like any other mortgage, a 40-year fixed loan is a tool to accomplish a certain goal and it might be the right tool for you. Regardless it’s important that you speak with an experienced mortgage consultant who can guide you through the process.
Jack
With interest rates going up and property values starting to appreciate at a slower rate or flatten out, a new kind of loan has started to become more popular. The 40-year fixed loan allows you to amortize the loan over a 40-year period instead of the usual 30 years. This results in a lower monthly payment, which can come in handy when rates are higher. There are some pros and cons to this type of mortgage. I will explain why I personally don’t like these loans except in special circumstances.
The main advantage of a 40-year fixed loan is that your monthly payments are lower. Since this loan is typically fully amortized (a small amount of principle is paid down monthly), the loan balance will slowly decrease each month. This is the main advantage of a 40-year fixed loan over an interest-only loan if your goal is to pay down principle. Another advantage is that while most interest-only loans have minimum FICO requirements of approximately 580, a 40-year fixed loan is available if your FICO score is as low as 500.
One of the main cons of getting a 40-year fixed loan is that over the course of 40 years, you end up paying a LOT more interest than a 30-year loan, with a payment difference that is fairly negligible. For example, on a 30-year fixed loan of $300,000 a borrower will end up paying $647,000 in principle and interest over the course of the loan. This is scary enough, but on a 40-year fixed it’s much worse – with the same loan amount the borrower ends up paying $843,000 after 40 years. And the worst part of all is that for the extra $196,000 the borrower ends up paying after 40 years, they end up with a monthly payment that’s only $45 lower!
Another disadvantage of 40-year fixed mortgages is that you end up paying a higher interest rate for the privilege of paying the lender so much more interest. Rates for a 40-year fixed are about 0.5% higher than a comparable 30-year fixed loan. This doesn’t sound like much, but over 40 years it adds up to a significant amount more interest – almost $200,000 in our example above! This is also part of the reason why the monthly payment difference isn’t very big between the two loans – although the payback period is lengthened, the interest rate is higher and the two almost even out.
One last thing that most people, including loan officers, don’t realize about 40-year fixed loans is that most of the time, especially in the sub-prime market, you can’t even keep the loan for 40 years. Most lenders write the loan with a balloon payment, which means that although the mortgage is amortized over 40 years, it’s actually due in full after 30 years. If you’re considering a 40-year fixed loan, make sure your loan officer explains the program to you completely and read the note carefully to make sure you’re getting what you think you’re getting.
As you can see, there are a lot more cons to getting a 40-year fixed mortgage than there are pros. So why would anyone want to get a 40-year fixed? The only time I recommend them is when the monthly payment difference of $50-100 makes a huge difference to you AND you don’t qualify for an interest-only loan. Interest-only loans are a much better way to keep the payments down, but as I mentioned above there are minimum FICO requirements that not everyone can meet. Only in these situations do I recommend 40-year fixed loans.
If you’re considering one of these loans I would highly recommend you look at a 30-year fixed loan instead if you plan on keeping the loan for an extended period of time, or an interest-only loan instead if the lower monthly payments are more important and you qualify. Just like any other mortgage, a 40-year fixed loan is a tool to accomplish a certain goal and it might be the right tool for you. Regardless it’s important that you speak with an experienced mortgage consultant who can guide you through the process.
Jack
Your FICO Score and Getting a Home Loan with Poor Credit
Posted in Real Estate on 03/22/2010 01:37 pm by
Carrie Reeder asked:
Your FICO score is a credit score used by lenders to determine how risky it is to loan you money. The lower your FICO score is, the harder it will be for you to get approved. This article offers information on how your FICO score affects you, as well as information on getting a home loan with poor credit.
Your FICO score is determined by your borrowing record. Things that affect your FICO score include the amount of time a credit account has been established, the amount of credit used vs. the amount of credit available, late payments, and negative credit information, such as bankruptcies, collection action, and bad debt write-offs. With just a few blemishes in your credit history, your FICO score can be seriously tarnished.
Raising Your FICO Score
There is no way to increase your FICO score overnight. Credit repair takes time and serious effort. However, if you need to raise your FICO score as fast as possible, the following tips will help:
Your FICO score is a credit score used by lenders to determine how risky it is to loan you money. The lower your FICO score is, the harder it will be for you to get approved. This article offers information on how your FICO score affects you, as well as information on getting a home loan with poor credit.
Your FICO score is determined by your borrowing record. Things that affect your FICO score include the amount of time a credit account has been established, the amount of credit used vs. the amount of credit available, late payments, and negative credit information, such as bankruptcies, collection action, and bad debt write-offs. With just a few blemishes in your credit history, your FICO score can be seriously tarnished.
Raising Your FICO Score
There is no way to increase your FICO score overnight. Credit repair takes time and serious effort. However, if you need to raise your FICO score as fast as possible, the following tips will help:
Bad Credit Mortgage Companies
Posted in Real Estate on 02/26/2010 02:03 am by
Kristy Annely asked:
Earlier, having bad credit was the greatest detriment to getting a mortgage approved. However, today there are a vast number of companies who specialize in providing mortgages to people with bad credit. Even a large number of mainstream companies (read: highly reputable companies) are joining the fray. Mortgages to people with a bad credit history are today considered to be big business.
Bad credit mortgage companies, also called sub-prime mortgage companies, rely on FICO scores to determine the creditworthiness of a person. These scores are available with agencies such as Equifax, Experian and Trans Union Corporation. A FICO credit score of less than 620 is generally considered bad credit. Though mortgage companies today do not shirk from giving loans to bad credit people, they do not typically provide any mortgages to people below FICO scores of 500.
The bad news is that many mortgage companies do not hesitate in taking advantage of the precarious situation their bad credit history clients are in. This is shown by the way they charge higher rates of interest than people with good credit. This means more business in the bad credit mortgage market. In addition, people with bad credit need to make a down payment (typically at least 20%) to prove their earnestness to the purpose of taking the mortgage. This is good to the borrowers, as it makes repayment easier. Bad credit borrowers are also obliged to pay mortgage insurance- only that the rates of interest may be marginally higher.
Yet today, with new laws being passed, the distinction between people with good and bad credit is blurring. Mortgage companies are charging lower rates of interest than before. With the advent of the new economic term ‘non-status’, which includes those self-employed people who cannot prove their accountability, several people have been subtracted from the bad credit category. The interest rates for non-status people are almost the same as that of people with good credit.
Companies specializing in bad credit mortgages are extensively advertising on channels such as the internet. They invite people to get pre-qualified and fill online application forms. Such companies are doing a great business in the market of bad credit mortgages.
However, people with bad credit must be wary of companies that are looking to fleece them. Some unscrupulous companies may create a psychological fear in the minds of their clients that they would not get loans elsewhere, so they can ensnare them for higher rates of interest. It is always advisable to shop around to hunt for the best bad credit mortgage company in the market.
Jimmy
Earlier, having bad credit was the greatest detriment to getting a mortgage approved. However, today there are a vast number of companies who specialize in providing mortgages to people with bad credit. Even a large number of mainstream companies (read: highly reputable companies) are joining the fray. Mortgages to people with a bad credit history are today considered to be big business.
Bad credit mortgage companies, also called sub-prime mortgage companies, rely on FICO scores to determine the creditworthiness of a person. These scores are available with agencies such as Equifax, Experian and Trans Union Corporation. A FICO credit score of less than 620 is generally considered bad credit. Though mortgage companies today do not shirk from giving loans to bad credit people, they do not typically provide any mortgages to people below FICO scores of 500.
The bad news is that many mortgage companies do not hesitate in taking advantage of the precarious situation their bad credit history clients are in. This is shown by the way they charge higher rates of interest than people with good credit. This means more business in the bad credit mortgage market. In addition, people with bad credit need to make a down payment (typically at least 20%) to prove their earnestness to the purpose of taking the mortgage. This is good to the borrowers, as it makes repayment easier. Bad credit borrowers are also obliged to pay mortgage insurance- only that the rates of interest may be marginally higher.
Yet today, with new laws being passed, the distinction between people with good and bad credit is blurring. Mortgage companies are charging lower rates of interest than before. With the advent of the new economic term ‘non-status’, which includes those self-employed people who cannot prove their accountability, several people have been subtracted from the bad credit category. The interest rates for non-status people are almost the same as that of people with good credit.
Companies specializing in bad credit mortgages are extensively advertising on channels such as the internet. They invite people to get pre-qualified and fill online application forms. Such companies are doing a great business in the market of bad credit mortgages.
However, people with bad credit must be wary of companies that are looking to fleece them. Some unscrupulous companies may create a psychological fear in the minds of their clients that they would not get loans elsewhere, so they can ensnare them for higher rates of interest. It is always advisable to shop around to hunt for the best bad credit mortgage company in the market.
Jimmy
FICO Scores and Mortgage Rates
Posted in Real Estate on 02/11/2010 04:13 pm by
Jennifer Bailey asked:
If you are in the process of getting a house and are planning to get either a fixed rate or interest only mortgage, the mortgage rate that you pay would go a certain length to help you decide. There are three main elements that effect you mortgage rate including the Federal Reserve Discount Interest Rate, your FICO Score and credit report, and lender business factors.
How does the Federal Reserve Discount Interest Rate affect you? Banks and other lending institutions borrow money from the Federal Reserve Banks at a “discount rate” that is set by the Federal Reserve Banks. This rate directly affects the “Prime Interest Rate” that the bank charges you. You will typically pay a rate based on prime, plus certain amount of interest. This will depend on the lender’s policy on consumer mortgages.
A FICO score is a scoring method that determines the credit worthiness of a particular credit user. In simple words, the FICO Score let’s the lenders assess how capable you are of paying off your credit. The FICO score will be arrived at after looking into the status and number of credit cards, balances owed, mortgage, installment loans, late payments, delinquencies, and bankruptcies. Potential lenders will get your credit report from a credit bureau.
You can achieve and maintain a good FICO score by paying all your bills on time, not applying for credit too frequently, and reducing your credit card balance. Check your credit information from time to time and ensure any false or outdated information is corrected. And don’t let companies do a credit check on you unless you are ready to buy because too many requests for a credit report can actually drive your FICO score down.
Lender business factors are the issues where your ability to be a smart shopper can make a real difference. While banks and other lenders are in business to make a profit, they also exist in a competitive market, which means that you can get a better price with a bit of research and negotiation.
Always check out at least three lenders. Each lender will have unique guidelines for how they write loans, and one lender’s guidelines could be more favorable to you than another.
Douglas
If you are in the process of getting a house and are planning to get either a fixed rate or interest only mortgage, the mortgage rate that you pay would go a certain length to help you decide. There are three main elements that effect you mortgage rate including the Federal Reserve Discount Interest Rate, your FICO Score and credit report, and lender business factors.
How does the Federal Reserve Discount Interest Rate affect you? Banks and other lending institutions borrow money from the Federal Reserve Banks at a “discount rate” that is set by the Federal Reserve Banks. This rate directly affects the “Prime Interest Rate” that the bank charges you. You will typically pay a rate based on prime, plus certain amount of interest. This will depend on the lender’s policy on consumer mortgages.
A FICO score is a scoring method that determines the credit worthiness of a particular credit user. In simple words, the FICO Score let’s the lenders assess how capable you are of paying off your credit. The FICO score will be arrived at after looking into the status and number of credit cards, balances owed, mortgage, installment loans, late payments, delinquencies, and bankruptcies. Potential lenders will get your credit report from a credit bureau.
You can achieve and maintain a good FICO score by paying all your bills on time, not applying for credit too frequently, and reducing your credit card balance. Check your credit information from time to time and ensure any false or outdated information is corrected. And don’t let companies do a credit check on you unless you are ready to buy because too many requests for a credit report can actually drive your FICO score down.
Lender business factors are the issues where your ability to be a smart shopper can make a real difference. While banks and other lenders are in business to make a profit, they also exist in a competitive market, which means that you can get a better price with a bit of research and negotiation.
Always check out at least three lenders. Each lender will have unique guidelines for how they write loans, and one lender’s guidelines could be more favorable to you than another.
Douglas
Low FICO Score Mortgage Loan Approvals
Posted in Real Estate on 02/04/2010 02:23 am by
Bill Burress asked:
With the tightening of underwriting guidelines many borrowers are getting turned down because their FICO scores are not high enough to meet the threshold requirements to be underwritten. Foreclosures are at an all time high and every week it seems the tightening is getting worse. Those with low FICO scores are often left out in the cold.
Lenders are using FICO scores to grade applicants to determine credit risk. A borrower may have a more delinquencies or collections or items on their public record that will reduce their score below many lender’s threshold FICO scores. Other factors that may reduce FICO scores can be the proportion of balances to limits on revolving or installment accounts. Some borrowers think that they can raise their scores by closing accounts. Many times this will lower their credit score. A borrower that has more than one name reporting on their credit may see a score hit. The same holds true with multiple addresses.
Some threshold scores are being raised with many lenders for underwriting purposes and as a result more borrowers are being turned down.
The key to getting the borrower approved is having programs where the threshold score is lower. Once that happens, the mortgage originator can at least look at the file and start verifying information and building a case for approval. Sometimes it’s a lot of work but many items can be explained to the underwriters if the borrower’s FICO score meets the minimum threshold level. This will work the same whether the borrower is trying to get refinanced or purchase a home.
Jean
With the tightening of underwriting guidelines many borrowers are getting turned down because their FICO scores are not high enough to meet the threshold requirements to be underwritten. Foreclosures are at an all time high and every week it seems the tightening is getting worse. Those with low FICO scores are often left out in the cold.
Lenders are using FICO scores to grade applicants to determine credit risk. A borrower may have a more delinquencies or collections or items on their public record that will reduce their score below many lender’s threshold FICO scores. Other factors that may reduce FICO scores can be the proportion of balances to limits on revolving or installment accounts. Some borrowers think that they can raise their scores by closing accounts. Many times this will lower their credit score. A borrower that has more than one name reporting on their credit may see a score hit. The same holds true with multiple addresses.
Some threshold scores are being raised with many lenders for underwriting purposes and as a result more borrowers are being turned down.
The key to getting the borrower approved is having programs where the threshold score is lower. Once that happens, the mortgage originator can at least look at the file and start verifying information and building a case for approval. Sometimes it’s a lot of work but many items can be explained to the underwriters if the borrower’s FICO score meets the minimum threshold level. This will work the same whether the borrower is trying to get refinanced or purchase a home.
Jean
Qualify For An FHA Loan – FICO Score Not A Big Deal
Posted in Real Estate on 11/15/2009 12:02 pm by
Leslie Collins asked:
One of the most attractive features of an FHA loan is that you need no specific FICO score to qualify for the program.
This is great news for you if you are looking to buy a new home or are wanting to refinance your current loan.
FHA lenders are very flexible regarding credit and look mainly at your overall credit worthiness. They will not evaluate each specific negative credit item that appears on your credit report but rather look at you repayment trend over time.
FHA guidelines allow 2 missed payments (auto, credit card, mortgage etc…) over the last 2 years as a requirement to qualify for a loan.
This advantage really can help you get the home of your dreams if your past credit history has been less than spectacular but are now however more financially stable. Remember, negative credit usually effects your credit score for about 7 years. Families that are “doing well” TODAY financially are not penalized for negative credit in their past – FHA is a forward thinking program.
When you compare a FHA to a conventional loan this flexibility is amazing considering Low FICO scores virtually eliminate you from dealing with conventional banks.
But does this even matter?
Probably not, because there is no advantage many times; Lately FHA loans are advertising very attractive interest rates which are as low or even lower than conventional 30 year fixed rates from the major banks.
So as long as you have a valid social security number, are able to prove income (w2, 1099, tax return, pay stubs etc…), can establish yourself as credit worthy an FHA loan and have a minimum of 3% down-payment an FHA loan is probably well within your reach.
Jackie
One of the most attractive features of an FHA loan is that you need no specific FICO score to qualify for the program.
This is great news for you if you are looking to buy a new home or are wanting to refinance your current loan.
FHA lenders are very flexible regarding credit and look mainly at your overall credit worthiness. They will not evaluate each specific negative credit item that appears on your credit report but rather look at you repayment trend over time.
FHA guidelines allow 2 missed payments (auto, credit card, mortgage etc…) over the last 2 years as a requirement to qualify for a loan.
This advantage really can help you get the home of your dreams if your past credit history has been less than spectacular but are now however more financially stable. Remember, negative credit usually effects your credit score for about 7 years. Families that are “doing well” TODAY financially are not penalized for negative credit in their past – FHA is a forward thinking program.
When you compare a FHA to a conventional loan this flexibility is amazing considering Low FICO scores virtually eliminate you from dealing with conventional banks.
But does this even matter?
Probably not, because there is no advantage many times; Lately FHA loans are advertising very attractive interest rates which are as low or even lower than conventional 30 year fixed rates from the major banks.
So as long as you have a valid social security number, are able to prove income (w2, 1099, tax return, pay stubs etc…), can establish yourself as credit worthy an FHA loan and have a minimum of 3% down-payment an FHA loan is probably well within your reach.
Jackie
How FICO Can Determine Your Home Loan Approval
Posted in Real Estate on 07/04/2009 03:17 am by
Ricky Lim asked:
If you have tried to apply for a mortgage loan, you probably have come across the term called FICO. Even if you have not heard of it, rest assure it is used every time you look to secure a mortgage loan. It can determine whether or not your loan application is approved and also the interest rate you pay.
So what is FICO?
FICO are sometimes referred as credit scores. It is a computerized software model developed by Fair Issac Corporation (FICO) to determine credit scores.
Think of it as your personal financial score card, only that it is rated by a lending institution or company.
They will assign you a credit score based on an analysis of your credit history. It is then entered into a computer. Most major credit reporting companies such as Equifax and Trans Union uses the FICO model. Mortgage lenders then use your credit score to determine whether or not your loan is approved and the interest rate you pay.
You should note that not all credit reporting companies uses the same software so your FICO score may vary at each of them.
So what are the factors in determining your FICO score?
There are many factors used to determine your credit score. Examples are amount owed, types of credit and your payment history. I will try to break down the factors by percentage but do note this is just an estimate since not all credit companies rate the factors the same percentage.
1. Payment History
As much as 35% of your FICO score is determined by your payment history. Your records such as late payment of credit cards or previous loans and the length of time overdue will adversely affect your credit score.
2. Debt To Income Ratio
This accounts for 30%. How much you owe versus your income level can determine your FICO score in this area. Obviously, the more you owe and the less income you have, the lesser chance of your mortgage loan being approved.
3. Length of history
This accounts for 15%. Mortgage companies will check how long your accounts have been open and the amount of activity. So the longer and better your credit history, the better chance of scoring high in this area.
Other factors in determining your FICO score include the number and types of accounts you have, credit card balances, number of credit cards you have etc.
As you can see above, the best way to improve your FICO score is to practice proper financial management. Make sure to pay your credit card bills and loans on time and keep your credit card balances low. It does take time of course.
Scott
If you have tried to apply for a mortgage loan, you probably have come across the term called FICO. Even if you have not heard of it, rest assure it is used every time you look to secure a mortgage loan. It can determine whether or not your loan application is approved and also the interest rate you pay.
So what is FICO?
FICO are sometimes referred as credit scores. It is a computerized software model developed by Fair Issac Corporation (FICO) to determine credit scores.
Think of it as your personal financial score card, only that it is rated by a lending institution or company.
They will assign you a credit score based on an analysis of your credit history. It is then entered into a computer. Most major credit reporting companies such as Equifax and Trans Union uses the FICO model. Mortgage lenders then use your credit score to determine whether or not your loan is approved and the interest rate you pay.
You should note that not all credit reporting companies uses the same software so your FICO score may vary at each of them.
So what are the factors in determining your FICO score?
There are many factors used to determine your credit score. Examples are amount owed, types of credit and your payment history. I will try to break down the factors by percentage but do note this is just an estimate since not all credit companies rate the factors the same percentage.
1. Payment History
As much as 35% of your FICO score is determined by your payment history. Your records such as late payment of credit cards or previous loans and the length of time overdue will adversely affect your credit score.
2. Debt To Income Ratio
This accounts for 30%. How much you owe versus your income level can determine your FICO score in this area. Obviously, the more you owe and the less income you have, the lesser chance of your mortgage loan being approved.
3. Length of history
This accounts for 15%. Mortgage companies will check how long your accounts have been open and the amount of activity. So the longer and better your credit history, the better chance of scoring high in this area.
Other factors in determining your FICO score include the number and types of accounts you have, credit card balances, number of credit cards you have etc.
As you can see above, the best way to improve your FICO score is to practice proper financial management. Make sure to pay your credit card bills and loans on time and keep your credit card balances low. It does take time of course.
Scott