Just received an update from a MAJOR investor that credit scores less than 620 are going to be priced SIGNIFICANTLY higher beginning Monday, January 12, 2009.
This is significant for folks who are purchasing, and using USDA or FHA/VA financing tools. The "hits" for scores between 600 and 620 today are .25. Meaning that it costs us almost a quarter of a discount point more to do a loan with those scores. In most cases, this means we can still get a rate of 5% for these folks.
According to the news bulletin, the new cost for doing a government loan with a credit score between 600 and 620 will be 1.25%. Now that could mean that someone with a 617 score (I have a borrower right now with a middle of 617 and no lates in the last 5 years) would suffer... because their BEST RATE (with new pricing) is 5.5%!
Because of the rate spread loan rules in NC, this means that many people with credit between 580 and 600 (that cost goes to 2.0%) - might not be able to get financing! If you are considering a new mortgage, or you would like to refinance, let us look at your credit first, and see what might need to be done to improve your score! Steve and Eleanor Thorne
Wow, Eleanor! This is huge news. I am glad that you blogged this and are keeping your clients up to date with the day to day changes in the market. Clients need great advisors like you more than ever in 2009!
JB - this really is big news. Wells Fargo has made some huge changes in the past and this will have wide ripples too!
I'm sure we have not heard the last of the adjustments. Imagine when all the people that have been foreclosed on try to get a mortgage in 2 years will the investors make an adjustment for them?
The market is NOT plentiful for credit scores below 620.
Even Freddie Mac new minmum score is 620. Not everyone in these tough times can maintain such as high credit score.
We must ask lenders to help those with scores under 600 as they are not second class citizens.
Marian Thomas
mavericksellsmoney@gmail.com
thanks for the heads up, eleanor - this is great info to have.
I wish that they would start letting the public know these numbers! Thank goodness you are good enough to post it and get it live on the internet! People need to know where they are, so that they will know where they are going! Have you been to the new Community Site that Buff set up?
It's a Good Life!
Fran
No people under 600 are not second class citizens... but they are second class borrowers... hey it is all about risk. I think credit scoring only tells part of the issue and for that there should be some flexibility... but if your score is under 600 there is a reason and perhaps you should start today to do something about it...
who said it? someone said it....some might have a 580 or more to even get a loan??
Thanks for sharing this update! Very important to know for potential buyers!
Mi Amiga, my darling friend...... lets visit about the rate hits to under 620 and then under 600 and oh under 580 forget about it. AS you and I both know..... we are more than loan officers we are credit counselors.....
PS GO GO SCUBA SHOP
Its already so hard for some buyers to find financing and now we raise the bar one more time. Its getting worse and not better.
I'm one of the folks who is barely 600. I corrected past mistakes by paying-off all my collection accounts. Although that was the right decision, it plumeted my scores.. However, not being late on my two active accounts ( car & school loan) in 18 months. no credit card debt...strong income 11% DTI and $60,000 in reserves by just living on one salary and saving the other. I started building our home on 10/08 when FHA required 580. New rules changed during the building process.. I breaks my heart to know, I'll dissappoint my wife kids and not be able to close in the next month or so.. It's a bad break I got, but I understand the current credit market.. I just wish banks focus on analyzing a customer's overall credit worthiness and financial credibility instead of just simply basing your qualification on credit scores...