Credit Scores for Home Loans
If you are planning to finance or refinance your home, you need to understand a thing or two about what is happening in the mortgage universe. As you may already know, the mortgage industry had very low standards for consumer credit ratings and home loan downpayments a few years ago. The story on the street was that if you had a pulse, you could get a home loan with no money down. This was not totally true, but suffice it to say that lending standards were pretty low. Mortgage companies would write a loan with a consumer, then bundle that loan together with other loans and sell them to investors. Clearly, that policy did not work. Consumers began to default on their loans at an alarming rate and the financial mortgage industry collapsed around those defaults.
To help, the Bush Administration and the Obama Administration bailed out the banks. Many of the home loans in America are backed by the Federal Housing Administration, a division of the Department of . FHA insures the loans. Since the passing of the Frank-Dodd legislation, standards for home mortgages have increased as mandated by law. Among those standards are requirements for FHA backed loans and standards for Government Sponsored Entities like Fannie Mae and Freddy Mac.
The first new standard is that consumers should anticipate putting 20% down. You can put less down, but that puts you into a higher risk type of mortgage and you will likely pay a higher rate.
The second new standard is that consumers should anticipate having a FICO credit score of 640 or higher to qualify for FHA. (Vetrans have special levels of 620). (FYI – of the nearly 5800 FHA loans closed this year to date by PrimeLending, only 149 have been below 620)
Here is some good news. Century 21 Hometown Realty can help. Our affiliate mortgage service provider, PrimeLending has a solution. They will continue to offer FHA loans with FICO scores as low as 620 with the following overlays.
- Fixed Rate Only
- Primary Home
- Purchase and Rate/Term (no chas out refinance)
- Max Ratios 31/43%
- 2 months PITI for reserves (must come from checking or savings accounts )
- Origination fee must be paid by the seller
- Approve Eligible or LP Accept Only
- Base loan limits must be below $417,000
- Max Seller Contribution 3%
- No lates on housing payment in the last 12 months
- No Property Flips
You may not understand all of these terms and conditions. Century 21 Hometown Agents can explain them to you, and/or set up a call or meeting with PrimeLending. PrimeLending representatives are in Century 21 Hometown office every day.