Following is an article I read in The New York Times I thought would be helpful. I can personally attest to the insanity involved in obtaining a loan nowadays. I would suggest you pay attention to the following article. You might not imagine the “horrors” of obtaining a loan or refinancing, but I guarantee you, most of what you read and hear about trying to qualify for a loan is TRUE.
To avoid another real estate bubble, many lenders have tightened their mortgage requirements. According to a report by the Federal Reserve, a majority of banks are less likely to offer loans to people with a FICO score of 620 and a 10 percent down payment than they were in 2006. Lenders were also less likely to do so even for those with a score of 720. The good news though is there are some tactics that consumers can employ to raise their scores.
Why are home loans so difficult to obtain?
Making sense of the story
- First, it is worth noting that median credit scores are rising, as people reduce debt and spend less in tight economic times. Some 18 percent of Americans now have scores of 800 to 850, while 15 percent are below 550, according to FICO data.
- Often lenders will review FICO scores from the three big credit agencies, and they use the middle number to evaluate the borrower. That number becomes the borrower’s “risk number.”
- Borrowers can figure out their risk number by obtaining their three credit reports, available free once a year at AnnualCreditReport.com, and studying them carefully for errors or omissions.
- According to FICO, the two biggest factors in a credit score are payment history, which accounts for 35 percent of the score, and the amounts owed, accounting for 30 percent.
- Knowing that information, one can raise his/her credit score by reducing balances on credit cards. However, if an account is in collection, it is too late to improve the credit score by paying it off. The notation that an account is in collection is what lowers the score, so consumers may get more mileage by paying down active credit-card balances and other debts first.
- Though mistakes and bankruptcies may stay on a credit report for seven years, lenders will generally be more likely to overlook late payments that happened two or more years ago than more recent ones.
- Improving one’s credit score could take three to four months, or it could take as long as 18 months. “It isn’t an easy fix,” said Carol Yopp, a program manager for the Long Island Housing Partnership and a former mortgage underwriter. “Don’t expect it to happen overnight.”
How else can I improve my home buying experience?
What tips do you have to lower your credit score?
IMPORTANT: If you or someone you know is interested in buying or selling a home in the Palm Desert Area, try searching properties on the same Desert Area MLS Realtor’s use, or give me a call….or visit my website at Palm Springs Homes and Estates. I will be happy to give you or your referral my “red carpet service.” After the sale, I will send you a $50 Gift Certificate towards dinner in a fabulous Palm Springs Area Restaurant so you can celebrate!
Brought to You By Your Favorite Realtor
Nancy Hankin
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