Credit Score Demands
April 7, 2008
It was not that long ago when consumers with credit scores in the low- to mid-600 range could get a home mortgage with no money down payment. In addition, they only had to state their income and very little investigating was conducted by the lender to verify that information. Times have changed.
With the current mortgage mess, a credit score below 680 is often seen as warning flag that can just as often force a potential homeowner into higher rates and expensive special fees.
As a side note, credit scores range between 300 and 850.
Dan Green, a certified mortgage-planning specialist and author of TheMortgageReports.com recently said: “Credit is the gateway right now. Weak credit is cost prohibitive.”
Many consumers will be better served if they understand that in addition to better credit scores, they will also be made to provide proof of income and assets.
In addition, consumers should know that many lenders have significantly reduced the amount of money they will lend on many types of purchases, including home loans. Lenders are also trending toward lowering their maximum loan-to-value (LTV) ratios.
In simple terms, the LTV ratio measures the amount a consumer borrows compared with the total value of the property being bought. Generally in the recent past, LTV ratios did not exceed 80 percent; however, during the heyday of the housing market boom, borrowers could take out a loan worth more than the house was priced.
Overall, higher credit scores and larger down payments as well as verifiable income seems to be coming back into vogue for those wishing to buy homes.