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FICO Launches New Credit Scoring Model (FICO 10): What does this mean for your mortgage qualification?

Feb 18
6:02
AM
Category | Mortgage Industry Updates & Announcements
 
FICO Launches New Credit Scoring Model (FICO 10): What does this mean for your mortgage qualification?
The short answer: Nothing. While the FICO 10 scoring model is being rolled out this year, most mortgage lenders will not utilize this version for qualification for some time. Read on for full details.
 
FICO 10 Credit Scoring Model
Just recently announced, FICO is launching a new scoring model coming summer of 2002. This new model is called FICO Score 10. It will take into account a consumer’s account balances and missed payments over the last two years.
 
With these new changes, many Americans will likely see their credit scores change this summer. The new approach now incorporates consumers’ debt levels, taking into account account balances for the previous 24-plus months, while prior FICO scores focused on more recent account balances.
 
Are you at Risk?
The newer model can put borrowers with late payments on their records at a disadvantage. In addition, consumers with a history of high utilization ratios (the amount of credit you use vs. what you have available) will also see their scores drop. However, for borrowers with already good credit, the new model will likely provide a boost. On loans and mortgages, it could even mean additional saved on interest and fees (again, when lenders start to use it)!
 
Overall, this scoring model is deemed to be more accurate. It is better for consumers because there’s many who aren’t getting the credit score, they deserve. For example, if someone has a 690 but really should have a 700, they’re missing out on lower fees and rates that they higher credit score would get them.
 
What Can You Do To Improve Your Credit Score?
  • Try to pay off your credit card balances early, even before their monthly due date.
  • If you are already a homeowner, stay on top of your monthly mortgage payments.
  • Reduce your spending where possible
Will Lenders Use This Model?
Lenders will most likely not see these scores in practice in the mortgage industry for several years to come. Currently Freddie Mac and Fannie Mae only approve one FICO score model and it is the one which was created in 2004.
 
New score models were created over the years including FICO® 8, FICO® 9 and FICO® 10. Until Fannie Mae and Freddie Mac approve the use of different models, lenders must use the model they deem appropriate/approve. Per FICO® - “Updates incorporated in new releases (FICO® Score 8, 9, etc.) do not impact the older models”.
 
Credit Basics Are Still Important
 
Payment History
The factors that FICO looks at to calculate your score overall aren’t changing with the new model. Payment history will still make up about 35% of FICO scores. So, paying your bills on time (and in full) remains crucial to getting a good score.
 
Total Amount You Owe
Around 30% of your FICO credit score is based on the total amount you currently owe, and that’s still true under FICO 10. Keep your balances as low as possible! Do not use more than 30% of your available limit with products like credit cards.
 

 

After the two factors mentioned above, the length of your credit history, your mix of loans and the new accounts you’ve applied for recently, remain important to calculating your credit score.

Checking Your Credit Score Online

When consumers go online and receive their scores’ they must review which scoring model they are receiving. Consumers could get a Vantage Score, a whole different scoring model. They most likely will get a FICO® model score but must verify the version. The difference in score versions provided can have a consumer find a variance of 30-90+ points from lender accessed scores. Keep in mind, Credit Karma uses Vantage, which can render significantly difference scores than used for mortgage qualification.

Online scores are good to gauge where your scores sit, but only a lender can provide the true FICO® lending score used for decision making. Scores are obtained when the credit bureau information from Experian, Equifax and Transunion is evaluated by the FICO® model score. This is a snapshot at the time the credit report is pulled. It is a lender guideline to use the middle score. For example, a 650 – 690 and 675 score would result in the middle score being a 675.

Bottom Line

Instead of getting hung up on which model a lender may use, it’s important to practice fundamental good habits such as paying bills on time and keeping your debt low. If you’re thinking about buying a home, get to know your credit score better and how to improve it! Learn more here. 

Give Greenway Mortgage a call to discuss your credit score in detail. There are many different ways we can help. 908.489.4658. 

Important Resources

 

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FHFA Raises Conforming Loan Limits for 2020

Dec 4
2:08
AM
Category | Mortgage Industry Updates & Announcements

On November 26, 2019 the Federal Housing Finance Agency (FHFA) announced an increase in the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2020.

The maximum loan limit for one-unit properties will be $510,400, an increase from $484,350 in 2019. Release.

The decision was based on the recovery of housing prices under the Housing and Economic Recovery Act of 2008 (HERA). They require that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price.  

FHFA third quarter 2019 House Price Index (HPI) reported that house prices increased 5.38%, on average, between the third quarters of 2018 and 2019. The baseline maximum conforming loan limit in 2020 will increase by the same percentage.

For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. 

A list of the 2020 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here.

Contact your Greenway Mortgage loan officer today for more details about how the increase can impact you.

2020 Conforming Loan Limits Effective January 2020

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FHA Single Unit Condo Approvals are Back!

Nov 19
2:23
AM
Category | Mortgage Industry Updates & Announcements
The Department of Housing and Urban Development (HUD) recently announced new rules and policies regarding FHA loan approval of condominium units. This is the news realtors, lenders and homebuyers have been anticipating for over a decade because condominiums have become a source of affordable, sustainable homeownership for many families.
 
Individual Condo Unit Approval for FHA Loans
In an effort to promote affordable and sustainable homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) has established a new condominium approval process allowing certain individual condo units to be eligible for FHA mortgage insurance even if the condominium project isn’t FHA approved.
 
In the past, a person who wanted to purchase a condo using an FHA loan had to choose a unit that was located within a previously approved condominium project. In other words, the entire building had to receive approval before a person could buy an individual unit with an FHA-insured mortgage loan.
 
A Change for the Better
This change makes the FHA loan program more flexible and responsive to market conditions. The new rules and guidelines will allow certain individual condo units to qualify for FHA mortgage insurance even if the rest of the project / building has not yet been approved for the program.
 
 So, that condo you or a client wanted, but couldn’t have, may now be FHA approved!
 
Key Highlights at a Glance
  • New single-unit approval process makes it easier for individual condo units to be eligible for FHA-insured financing.
  • First-time home buyers, small families and urban dwellers will benefit.
  • Improves housing affordability and helps homebuyers obtain a low-down payment mortgage.
There are other guidelines as well, in addition to those highlighted above. They will be included within the newly updated Single-Family Housing Policy Handbook, which is available online. Lenders and borrowers can refer to that handbook to learn more about single-unit condo approval for FHA loans or contact your local loan officer at Greenway to learn more.
 
First-Time Home Buyer Advantages
This new change is especially helpful for younger first-time home buyers as well as some seniors. As mentioned before, condos have become a source of affordable homeownership for many. This opens more doors to homeownership for younger, first-time American buyers as well as seniors who are hoping to age-in-place.
 
While the FHA loan program is not limited to first-time buyers, this group accounts for the majority of condo purchases that are financed through the government-backed loan program. According to HUD data, 84% of FHA-insured condominium buyers have never owned a home before. In addition, the new condo rules are expected to significantly increase the number of approved projects.
 
Looking Ahead
As a result of these new rules and policies, the FHA loan program could take a bigger share of the mortgage market in 2020.  Buyers who had to rely on conventional financing in the past to purchase a condo might now be eligible for the FHA loan program.
 
We are here to help answer any questions you may have and see if the property you're looking at is eligible. Contact us today for more information. (908) 489-4658.
 
 
 
Fine Print:
  • If the non-approved condominium project has 10 or more units, up to 10% of them can be FHA-insured. (To extend eligibility beyond that 10% limit, the entire project would probably have to be approved.)
  • Non-approved projects with fewer than 10 units can only have up to two FHA-insured units.
  • FHA will only insure up to 50% of the total number of units in an approved condominium project.
  • FHA will require that approved condominium projects have a minimum of 50% of the units occupied by owners for most projects.
Eligibility requirements, exclusions and other terms and conditions apply.
 
 
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Lower Interest rates make Financing a Home today cost LESS!

Sep 24
5:16
AM
Category | Mortgage Industry Updates & Announcements

There's good news in the home financing world: Lower interest rates make financing a home today cost less than it did last year, even though prices continue to rise.

Look at the difference in the monthly principal and interest (P&I) payment with a 5% jump in price:

You can see the market offers a renewed opportunity to buy at a lower cost. Of course, no one knows how long current rate trends will last.

If you or a loved one is ready to purchase, please remember that getting a pre-approval for your home loan is a good first step. We are glad to discuss the markets, the process, and the many available financing options.

Are you ready to get started? Contact us today!

 

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FHA Raises Conforming Loan Limits for 2019

Dec 1
2:36
AM
Category | Mortgage Industry Updates & Announcements
On November 27, 2018 the Federal Housing Finance Agency (FHFA) announced an increase in the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2019.
 
The maximum loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018. Release.
 
The decision was based on the recovery of housing prices under the Housing and Economic Recovery Act of 2008 (HERA). They require that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price.  
 
FHFA third quarter 2018 House Price Index (HPI) reported that house prices increased 6.9%, on average, between the third quarters of 2017 and 2018. The baseline maximum conforming loan limit in 2019 will increase by the same percentage.
 
For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit.  
 
A list of the 2019 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here.
 
Contact your Greenway Mortgage loan officer today for more details about how the increase can impact you.

2019 Conforming Loan Limits Effective January 2019

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