Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected

Numbers Continue to Rise against Homeowners

By Sally Maison
Published: Tuesday, October 20th, 2009

Starting next month, homeowners and real estate buyers who have merely good credit scores will have tougher times getting a loan. Rules for obtaining or refinancing a mortgage were changed by new federal regulations imposed on appraisers, brokers, and mortgage lenders.

Numbers Continue to Rise against HomeownersDepending on the type of loan, a consumer whose credit score is 620 or below will find it very difficult to obtain financing. Things will change on Nov. 1 and Dec. 12, with Fannie Mae raising its lending standards to the 620 benchmark. Getting loans will be more difficult for consumers, even those which are secured by a federal agency such as the Federal Housing Administration (FHA) and Veteran Affairs (VA). Specialists say getting the best interest rates means a consumer must have verifiable and steady income plus a credit score of at least 720.

Fannie Mae, which stands for Federal National Mortgage Association, purchases and secures mortgage loans for US home buyers. Just before September ended, the government-sponsored enterprise raised its minimum lending criteria to minimize number of defaulted loans. Corporation representative explained that minimizing risks and increasing profit security will help keep Fannie Mae stable and its funds as well. They say it will also add stability to home prices since higher lending standards will decrease foreclosure rates in the future. It will likewise prevent huge decline in home prices, which is primarily cause by the inability of homeowners to finance their estate because of financial troubles.

Applicants for manually underwritten loans are set to experience new lending standards on November 1 while those who applied through Fannie Mae’s Desktop Underwriter will have to meet new criteria by December 12, after the software is updated.

Last year, a score of 620 was considered by specialists to be the dividing line between good and bad credit. Some even consider it good one, saying that it is the starting point for getting the best possible mortgage rates. However, lenders already rank consumers who have credit scores around 620 to be near subprime level.

Experts urge potential home buyers to start working on their score now so they save in the future. They say scoring formulas are kept secret by credit bureaus, but there are easy ways in obtaining better score. They cite paying bills on time and not keeping huge balances as one of the primary score boosters for consumers. They add that not closing old credit card accounts and utilizing them well by making small purchases and paying balances monthly is also important. Finally, they advise consumers to get a fixed-rate mortgage so they would not have to worry about their rates changing every five years or so.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.