Shutting the Door on the American Dream- New FICO Requirements will oust marginal credit buyers

Mortgage and Lending with Guaranteed Home Mortgage Company, Inc.

     Okay with this economy, especially in Michigan where I am, most people do not have 20% down. If they do they are cash buyers or seniors or move up buyers. Many people with a credit score less than 620 do not have allot of savings. March 3rd is the date that just about all of the Mortgage Insurance Companies have said, "NO MORE LIMITED DOWN PAYMENT PROGRAMS WITH A CREDIT SCORE LESS THAN 620, THEY WILL NOW REQUIRE 20% DOWN-PAYMENT".

      Let's just think about this for a minute. Today, I have a 1st Time Buyer, young guy, recently divorced, with joint custody of 2 young children. He has a 595 credit score due to an ex-wife with an ax to grind during the divorce and charged up their credit cards and opened a few without his knowledge. Medical collections that went unpaid, again he did not know about them. I have rarely seen a couple go through divorce while maintaining good credit. It just gets damaged.

     Back in the day (many years ago) the underwriter would see the negative event on the credit and look for re-established good credit in the last 24 months and obviously the other factors. My client does have 10 years on the job, a substantial 401K and on-time payments for the last 24 months.

     He is racing around town all weekend rushing to find a house. If he doesn't make an offer and have it accepted by Tuesday, we probably won't make it. He is approved Fannie Mae Expanded Approval Level 1. For those that don't know what this is. He will get a 30 year fixed rate at 7.375%. Which is 1% over todays rate. No pre-pay with 5% down. This is a good loan and a fair rate. These loans have been my mainstay for 1st time Buyers for the last 3 years. FHA will now be the only option. Well, I used to be a Branch Manager for National City and we did a fair amount of FHA so I am no stranger to it, but the loan still has to go through automated underwriting, with this score it will likely be denied.

        So today, I have a 1st Time Buyer out there that will be unable to buy a house. It breaks my heart, and I have a hard time trying to explain this when previously I had him Pre-Approved. Such a Bummer!! He is the 1st of the new era, but unfortunately will not be the last.


Cari Pilon
RE:STYLE Home Staging - Brighton, MI
RE:STYLE Home Staging
How frustrating to have a buyer and not be able to sell to him! Keep us posted on what happens with him - I feel bad now.
Feb 28, 2008 01:54 AM
Julie Hite
Guaranteed Home Mortgage Company, Inc. - West Bloomfield, MI
Oh, I didn't want to make you feel bad. I am positive that something good will happen for him. I commented on another blog and he had good advice on how to improve this guy's credit score if he doesn't make it in time. So I called the customer and he is going to try to get his credit limits raised. Thanks, I will let you know what happens.
Feb 28, 2008 02:02 AM
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

I am not premoting anything but I just did a video on how to get collections off your credit report for free...  check it out here

Mar 05, 2012 09:33 PM