Credit scores..... aka fico scores. I am a firm believer that you can't believe in everything that you read.
As you can see the illustration to my left, that it states that the average credit score is 678. I have a hard time believing this and just talked to a few loan officers and even a credit specialist about this. I just don't believe that 678 is the average credit score. If I had to put a number on it, I would say 610 to 620.
Why am I bringing this up? With so many changes to conventional loans and FHA loans when it comes to credit scores, it's been more costly for those applying for a conventional loan.
Conventional loans -- If you have less than 30% down with credit scores below 680, you will have pricing hits to your points or to the rate. Even if you don't see the hits, it will be in the price somewhere. This is a major wide adjustment made by Fannie Mae and Freddie Mac. No matter what mortgage banker or broker that you use, those penalties will be applied.
FHA loans -- FHA mortgages
There even has been some major changes on credit scores on FHA loans also. It comes down to the investors who make up their own pricing adjustments based on the risk that they want to take. This risk pricing is then passed onto the consumer from your lender.
So, what kind of pricing adjustments are we talking about when it comes to FHA loans? Many lenders can't go below a credit score of 580. Some can't even go below 600 or 620. I can go down to 500, but there are some pricing hits. We actually manually underwrite our own FHA loans in-house.
When it comes to the FHA jumbo loans, we can go down to 580, when many lenders can't go below 620. And this is still based on a manually underwritten loan. But if it got approved in the system by DU / LP / or DO, then we can go down to 560. The new pricing for these FHA jumbo loans is based on anything over the old limit for that particular county, up to the new limits. Those new limits can be found here : New FHA loan limits
Overall, some food for thought. Here are some red flags....
- If you are with a lender that is telling you that you are better off with a conventional loan rather than a FHA loan, but you are putting less than 30% down and your credit score is less than 680, you better look around. Not every lender is FHA approved. A great rule of thumb is if you are putting 10% or less with a credit score of 679 or below, that you would probably be better off with a FHA mortgage. Here is some proof. FHA loans vs conventional loans -- The true story told by numbers....
- If you have been in process for 3 weeks or so and settlement is fast approaching and your lender tells you that you are now in underwriting, keep tabs on this. If you don't have an approval within 5 days, start asking your lender questions. Yes, some of these brokers that send their FHA loans to other lenders are 10 to 14 days behind in underwriting. This could delay your settlement.
The last statement above was not based on assumptions. I have closed 3 clients in the last 45 days that were with other lenders. 2 of them were in underwriting for 10 days a piece and both were denied by their previous lender. The 3rd client missed their settlement date, but was never denied. One of these was in Virginia, one was in Pennsylvania, and the other client was in Florida. I closed all 3 of them in less than 10 days. Just beware of certain red flags and of some excuses that loan officers might use at times.
PLEASE READ :
If you aren't sure of your status, don't hesitate to call me. If you don't feel like you are getting the correct answers, call me. If things start getting changed on you (rates and or fees) or that your settlement date has been changed by the lender, definitely call me. Don't give in and give them a 2nd or 3rd opportunity, when it could cost you more money and frustration. If anything, seek another opinion. It can't hurt.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
DAN......well, in some areas, the credit scores will be higher than average. But in others. actually lower. It sometimes coexists because of different social classes. But since I am working with clients in 6 to 8 different states, I can sometimes get a better idea of the averages. I even spoke to my credit person and he seemed to think the average should be much lower. You just wonder how accurate the information is and the source.
JENNIFER...... why? is it a sex ed class? Seriously, what kind of speaker do you have tomorrow? Pay for my airfare and I would come out. Oh, wait... Robert Ashby will be back in town tomorrow night and invited Jason and I out. But because it is a school night, I don't think Jason will come out and play.