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  1. Changes In How Lenders Examine Credit Would Help Improve Mortgage Rates Available To Borrowers

    By on January 19, 2011

    It’s well know that mortgage rates, credit scores, mortgage applicationsyour FICO score, the credit score lenders use, has a major impact on what kind of mortgage rate and mortgage product you can obtain. More borrowers are having trouble qualifying for the best mortgage rate possible – or sometimes for any kind of home loan for that matter – in the current economic downturn. Get your free FICO score.

    But the National Association of Realtors argues that changes to how Fair Isaac Corp., or FICO, computes the score and how lenders judge credit can allow more borrowers to qualify for good mortgage rates and help improve the housing market while still protecting lenders. And this can be done without additional taxpayer money for homeowner bailouts or another unworkable loan modification plan.

    NAR has outlined several recommendations.

    Loan Modifications

    Homeowners should not see their credit scores drop if they meet modified loan payments. Homeowners might be able to repair their credit by paying modified loan payments, but only if the loan is reported as the same loan with changes, not a new one. Many lenders, however, report loan modifications as partial payments or mark it “not paid as agreed.”

    That damaged credit may make refinancing or buying another home nearly impossible.

    The credit reporting agencies now allow a new code for loans modified under a federal government loan modification, but FICO does not accept it, saying borrowers with modified payments are more likely be delinquent. Learn about foreclosure alternatives. Continue Reading…

    Category: Credit Score, Housing Market, Loan Modification, Mortgage Interest Rates, Mortgage Rates

  2. Difficulties in Qualifying for a Mortgage

    By on January 13, 2011

    Despite mortgage rates remaining well below 5 percent for the better part of nearly two years, there are several obstacles that stand in the way of potential borrowers obtaining a mortgage loan. Since the housing collapse, it has become increasingly more difficult for borrowers to gain approval to purchase or refinance a home. Underwriting guidelines have intensified greatly, making it especially challenging for homeowners or potential homeowners in today’s market. Among the three fundamental criteria that have influenced increased scrutiny among mortgage lenders include:

    • Credit Score Requirements

    • Appraised Values

    • Income and Asset Verification

    During the mortgage heyday, credit score requirements played a relatively insignificant role in the overall underwriting process. Credit scores were not entirely discounted, however. They were often simply disregarded in cases where the borrower’s income was stable. Although, income stability became a completely separate issue, as you will soon read.

    Today, an excellent credit score is absolutely essential in getting the best deal from a mortgage lender. That’s not to say a borrower will not get approved for a mortgage loan with a credit score of 620, but the rate will be significantly higher under the same scenario when compared to a borrower with a credit score of 740 or higher. In the end, the lower the credit score, the higher the rate and the higher the fees. Having exceptional credit goes a long way.

    The housing crisis witnessed a drastic decline in home values. A homeowner who purchased a home for $300,000 in 2006 may have witnessed the value drop to $240,000 or less today. Could a property really lose that much value in such a short period of time? Well, in the mortgage era that exhibited almost boundless lending limitations, many appraisers and mortgage lenders simply over inflated home values to make each and every mortgage application profitable. That said, the $300,000 home mentioned above may have never realistically reached that level of worth.

    In an effort to counter this problem, the federal government instituted appraisal regulations in the form of the Home Valuation Code of Conduct (HVCC). The main criticism of the HVCC, however, is that inexperienced appraisers who are unfamiliar with certain markets are producing imprecise appraisals that are ultimately causing mortgage applications to fail. In addition, the concept behind the HVCC was to curb appraisal fraud. Conversely, fraudulent activity actually increased in 2009 and quite dramatically, at that. In fact, appraisal fraud is now the fastest-growing form of fraud in the mortgage industry. Ultimately, the HVCC has become a barrier in the recovery of the housing market. Despite the previously mentioned precarious record regarding the HVCC, its life span has still yet to run its course and has yet to be determined.

    Mortgage lenders have since established far more rigid standards when it comes to scrutinizing a potential borrower’s income and assets.     For the most part, “Stated Income, Stated Assets” (SISA) and “No Income, No Assets” (NINA) programs have virtually vanished, and for good reason. Today’s lending guidelines require qualified borrowers to be more qualified than ever before. Some loan officers in the mortgage industry think of it as overkill, but the thinking behind such strict standards is to ultimately prevent another housing disaster. By verifying, re-verifying, and re-verifying again, mortgage lenders are simply doing their part to avoid another unfortunate crisis.

    In today’s lending environment, it’s crucial to have high credit scores, low debt-to-income (DTI) ratios and a 20 percent down payment. And that’s still not enough. It is also essential that borrower’s have a stable employment history, along with the ability to jump through any unforeseen hoops that come their way through the approval process.

    Robert Hyder

    Category: Appraisal, Credit Score, General, Housing Market, Mortgage Rate Trends and Analysis

  3. New Alert Will Highlight The Impact Of Credit Scores On Mortgage Rates

    By on December 27, 2010

    credit scores, mortgage rates, FICO scores, Starting Jan. 1 next year, mortgage lenders will be required to give borrowers credit score alerts on how their credit scores might be preventing them from getting good mortgage rates.

    The intent of the credit score alert is to warn mortgage borrowers about the impact of their FICO scores on mortgage rates and give them a chance to improve their credit or possibly back out of the home loan.

    The reality is that the credit alert will probably be just another government-mandated piece of paperwork lost in the large stack of documents that borrowers robotically sign with eyes glazed over.

    Instead of relying on a government-required document, mortgage borrowers should check their credit reports before shopping for mortgages rates. To improve their credit scores, borrowers should correct any mistakes and pay down credit card loans but leave the accounts open since larger credit lines relative to debt used is better for credit. How to improve your credit score.

    Regardless of government regulations, reputable mortgage lenders typically warn borrowers of credit score issues and, if possible, try to work with borrowers to improve their scores. That’s why working with an experienced, consumer-focused mortgage lender is important. Continue Reading…

    Category: Credit Score, Mortgage Interest Rates, Mortgage Rates, Mortgage Regulations

  4. Reduced Credit Lines Can Hurt FICO Mortgage Scores, Make Getting Low Mortgage Rates Harder

    By on November 24, 2010

    FICO Mortgage Score, FICO credit score, credit lines, mortgage rates Your credit score can suffer if your lender cuts your home equity line of credit through no fault of your own.

    That can make it more difficult to refinance your mortgage, purchase a new home, or get a personal loan. You could face higher mortgage rates or could even be denied a home loan.

    Many homeowners saw limits of their home equity lines of credit, or HELOCs, scaled back as home values dropped. That’s because lenders base HELOC limits your on combined loan to values, the ratio of your first and second mortgage to your home value.

    Unfortunately, a major part of the FICO score, the credit score used by most mortgage lenders, is based on how much of your available credit you use. If you’ve drawn down most of your HELOC, your credit score will suffer. The same thing applies to credit card limits.

    Fair Isaac Corp. the company that developed FICO scores, defends the practice, saying its research shows than people with higher debt loads are greater risks. The company recently introduced its FICO 8 Mortgage Score that it says is better at predicting if homeowners will repay their mortgage. Continue Reading…

    Category: Credit Score, Mortgage Interest Rates, Mortgage Rates

  5. New FICO 8 Credit Score Emphasizes Mortgages

    By on October 29, 2010

    credit score, credit score mortgage application, credit score mortgage ratesThe newest credit scoring product, the FICO 8 Mortgage Score, is supposed to do a better job at predicting if homeowners will keep paying their mortgages.

    The latest credit score product, now available from all three major credit reporting agencies, offers mortgage lenders “more precise risk assessment tailored for the real estate market,” according to Fair Isaac Corp., the Minneapolis-based company that devised the FICO score.

    The widely used credit score is an important factor for homeowners seeking to refinance their current mortgage or a mortgage to a purchase home. While a 700 score is considered good, Borrowers typically need a score around 620 or 650, depending on other factors like their amount of home equity, to obtain a mortgage loan.

    A lower score can mean paying a higher mortgage interest. Check current mortgage rates. A 100 point difference, Fair Isaac says, can mean paying $40,000 in extra interest payments over the live of a 30-year, $300,000 mortgage.

    Borrowers should check their credit score at myfico.com before applying for a mortgage to check for any mistakes and outdated information in the report, which can be costly. Paying bills on time, keeping debt levels low, and not applying for credit often can also help your credit score. Free FICO® Credit Score Estimator

    The FICO 8 Mortgage Score keeps the same 300 to 850 range but is designed specifically for mortgage lenders and servicers, who administer the loans.

    The new score, according to Fair Isaac, helps mortgage servicers spot homeowners at risk of defaulting and seek solutions to avoid foreclosures. It might be able save the mortgage industry $1 billion in foreclosure costs and help over 100,000 homeowners keep their homes.

    Placing greater emphasis on mortgage payments, the new score helps mortgage services spot at-risk homeowners by pushing homeowners who are over 90 plus days late into lower scores.

    The new score takes into account extra data sources on consumer credit to improve its predictive ability by up to 25 percent, the company says. The new score is also supposed to be easier for lenders to explain to mortgage borrowers.

    “The FICO 8 Mortgage Score’s broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,” said Jordan Graham,  an executive vice president at FICO.

    “To do the best job of evaluating risk and increasing profits, lenders need updated credit scoring analytics that incorporate mortgage credit performance since the subprime mortgage meltdown,” said Craig Focardi, senior research director at TowerGroup

    Category: Credit Score, Mortgage Interest Rates, Mortgage Rates

  6. Credit Scores Decline for Millions of Americans

    By on July 12, 2010

    Millions of Americans have seen their credit scores fall amongst the lowest levels possible. FICO is reporting that almost 44 million people, 25.5 % of consumers, currently have a credit score less than 600. A credit score this low makes a borrower a very high risk for lenders. These low credit scores will make it almost impossible for these consumers to obtain a mortgage, auto loans, or credit cards. Over the past two years the amount of people with credit scores below 600 has gone up by 2.4 million people.

    A very important group to look at is those with moderate credit scores, 650 to 699. The amount of people in this bracket is currently 11.9 percent of consumers, down from 12 percent in 2008. While the drop off is not that significant it is worth noting that the average number of consumers with these credit scores is usually 15 percent.

    The consumers with moderate FICO credit scores could be in the most trouble when it comes to lending. Consumers with scores below 600 most likely would not try to borrower but those with moderate scores may try to obtain loans. In previous years these were seen as good credit scores for obtaining loans but standards have toughened and these scores aren’t as good as they once were. These tightened standards may make it much tougher for these people to obtain loans, especially with the best mortgage rates.

    There are some positives when looking at the trends in our consumer’s credit score. The amount of consumers with an 800 credit score, a perfect score, has gone up recently. Currently 17.9 percent of consumers have a perfect score. This is significantly larger than the past average with is about 13 percent. These consumers with good credit scores should have no trouble obtaining any type of loan.

    It is pretty easy to ruin a good credit credit score but it can me very difficult to fix credit scores. To figure out if your credit score will qualify you for the best possible mortgage rates call 877-868-2503 to speak to a mortgage professional.

    Category: Credit Score

  7. HUD Will Not Raise Minimum FICO for FHA Borrowers

    By on March 15, 2010

    Recently, HUD (U.S. Department of Housing and Urban Development) assistant secretary and commissioner of the Federal Housing Administration (FHA) David Stevens announced that the agency will not be raising the minimum FHA borrowing score. Stevens stated that while the agency has been facing ongoing pressure to raise the minimum FICO score for FHA borrowers from the current 580 to 620, “that won’t happen” due to “the stabilizing and stimulating influence of the government” as being “indispensable.” FHA loans are federally assisted mortgage loans that are insured by the Federal Housing Administration. While the Administration does not issue the loans to the borrowers themselves, it will pay the approved lender if a borrower defaults on the loan.

    FHA mortgage loans are a great option for those borrowers who may not meet some of the stricter lending criteria of conventional loans. FHA mortgage programs are offered through FHA approved lenders and are advantageous because FHA Mortgage Programs typically offer lower interest rates, require a smaller down payment of 3.5 percent of the value of the home (although proposed legislation would increase this down payment to 5 percent, read more about this here), and do not demand a perfect credit score or history.

    Total Mortgage Services is a fully approved FHA lender and offers some of the best current FHA mortgage rates available. Call us today at 877-868-2503 to speak with one of our mortgage professionals and see if FHA is right for you.

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    Category: Credit Score, FHA, First Time Home Buyer

  8. FHA 203(k) Mortgages Offer Value, Opportunity

    1 By on February 16, 2010

    203k-mortgages

    While the economic crisis has had a detrimental effect on the lives of many Americans, it has also presented a golden opportunity to those with the means to purchase a home. The confluence of low current interest rates and an oversupply of homes on the market have made many homes available at a bargain rate.

    For those who have the wherewithal, purchasing a foreclosed home offers tremendous value and opportunity. However many foreclosed homes are in need of repair, and for a long time, securing financing through traditional channels for such a property was difficult.

    With a typical mortgage a lender requires that a house be in good enough condition to provide security for the loan. Generally this means that renovations must be finished before the lender issues a long term mortgage. Often this requires the home-buyer to get financing to purchase the home, financing for the renovations, and finally a permanent mortgage to pay off the previous loans.

    This financing arrangement is complicated and unwieldy, and often discourages people from pursuing such properties. In response, the FHA and HUD developed the 203(k) loan program in order to encourage community redevelopment and revitalization and expand home-ownership opportunities.

    With a 203(k) loan, a borrower in compliance with FHA guidelines only needs to get one permanent mortgage to finance acquisition and rehabilitation of the property.

    Recently Total Mortgage Services President John Walsh spoke with the New Haven Register about the increased demand for 203(k) loans “A lot of these home that are foreclosed, they are distressed to some level. It has to be fixed in order to get a loan. Banks just aren’t giving construction loans; this is really the only option for people who want to buy a home that is distressed”.

    Walsh went on to comment that 203(k) mortgages can be more complicated than standard mortgages, and that it is important to seek out advice from a mortgage experts that have experience with 203(k) loans.

    While credit standards have tightened on almost all loans in light of the economic downturn, credit qualifications through the FHA are more lenient than traditional lenders. Additionally, the FHA generally only requires a 3.5 percent down payment for the home.

    Total Mortgage services is a Full-Eagle, FHA approved lender. To explore your options under the 203(k) program, please call one of our mortgage experts at 877-868-2503.

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    Category: Credit Score, FHA, First Time Home Buyer, Purchase

  9. Buying Power: Buyers Now Have Upper Hand Over Sellers

    By on September 9, 2009

    buying-power

    Although the American dream of homeownership has gotten much more stringent since the collapse in the housing market, it is still very much attainable. Amid an economic crisis not seen since the Great Depression, which ironically also originated in the United States, those looking to purchase a home or refinance their existing home must possess larger down payments (or enough equity in their home to refinance), secure employment and excellent credit.

    The stricter demands set forth by the nation’s mortgage lenders require patience and perseverance. Earlier this decade, as home prices artificially skyrocketed and mortgage loans were nearly effortless to garner approval, banks were distributing funds to un-creditworthy borrowers as readily as they used to pass out lollipops to children. That is no longer the case as banks are being much more thorough and cautious when it comes to their policies on mortgage lending.

    The return of the “buy what you can afford” standard is what is desperately needed during this economic downturn. Even though the economy is showing early signs of strengthening, those looking to purchase a home – particularly first-time homebuyers – have the upper hand over sellers. As home sales continued to rise for six consecutive months through July, asking prices have been reduced. The $8,000 first-time homebuyer tax credit has certainly helped, but it appears the shift in command that has given borrowers the advantage could last for a few years. With extremely low current mortgage rates and an abundance of homes waiting for occupancy, borrowers are now able to be much more selective than they once were.

    –Robert Hyder

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    Category: Credit Score, Current Mortgage Rates, First Time Home Buyer, General, Mortgage Rate Trends and Analysis, Purchase, Refinance, Stimulus

  10. Mortgage Applications Increase Again

    By on August 31, 2009

    mortgageapplication

    Generated mainly by low current mortgage rates, mortgage applications rose last week by approximately 7.5% when compared to the week before. The boost in mortgage applications consisted mostly of refinances, which rose just below 13% for the week, and consisted of approximately 56.5% of all mortgage applications for the week. The increase in refinance mortgage applications has been the third increase in the past four weeks. While refinance mortgage applications were up, purchase applications were up, as well, however slightly less. Although they were only up approximately 1%, purchase mortgage applications have risen four consecutive weeks. The four-week stretch of purchase applications increasing has not been seen since March, when interest rates remained below 5% for an extended period of time. When compared to the same week for 2008, mortgage applications were up more than 34%, an astounding growth.

    In addition to the low current mortgage rates and the $8,000 tax credit for first-time homebuyers, the recent demand for home mortgages has been sparked mainly due to the availability of government-backed mortgages, such as FHA and VA mortgage loans. With minimal down payment requirements FHA-insured mortgages are as popular as they have ever been.

    U.S. Department of Housing and Urban Development (HUD) spokesman Lemar C. Wooley said, “We’ve raised our required down payment from 3% to 3.5% … but that is still substantially lower than the 20% you’d have to pay for a conventional loan, if you can get it at all.” Furthermore, credit score requirements for FHA mortgage loans are significantly less than that of a conventional loan. However, borrowers with higher credit scores often secure more favorable mortgage rates as a result.

    –Robert Hyder

    Follow Total Mortgage on Twitter

    Category: Credit Score, Current Mortgage Rates, FHA, General, Mortgage Rate Trends and Analysis, Purchase, Refinance, Stimulus

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