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Posted in Featured, Mortgages and Equity Loans

Mortgage and Loan Basics


Mortgage and Loan Basics

The FHA has made a few changes this spring and one of these changes is the new FHA loans standard people have to conform to regarding down payments and FICO score requirements. Based on what Galante has stated, if people would like to sign up for a house loan, even if they will have a credit score that is equal to five hundred and eighty or close to it, they will find it to be kind of hard to get their loan approved. Why?

There are many lenders who require people to have a FICO score of at least six hundred and twenty if people would like to have an FHA loan secured. Even if the minimum imposed by the FHA is five hundred and eighty, it doesn’t automatically mean that a certain bank would like to issue credit to individuals who have such a score. Getting to the basics, the loan program put together by the FHA is actually a voluntary one and lenders choose whether they will participate in it or not. There is no action the FHA can take in order to convince lending institutions lower their FICO requirements.

And that begs the question: What can you do if your score is not of 620?

Well, first of all you should call the FHA and get some assistance and ask for a referral to a housing counselor who is approved by the FHA. This way you will be taught about some effective measures you can take to increase your credit score. Housing counseling and credit counseling will certainly help you with solving your credit issues which will eventually allow you to get the loan you want so badly.

It’s vital to keep in mind that all of this will take time (you need to have at least 1 year of on-time payments) and if required, your credit score should rise. If you have low FICO credit scores then it means you will need to pay more for mortgage, so that is why it’s recommended you will try as much as possible to get the score to 620 or more. It guarantees you will be approved.

How much will credit inquiries affect my score?

This is something that depends from person to person and it’s based on each individual’s unique credit history. Generally, one’s FICO score is slightly impacted by credit inquiries and for the majority of individuals, if they consider a credit inquiry their score will be lowered with maximum five points, but usually less than that.

For perspective, you should know that the complete FICO score range is three hundred to eighty hundred and fifty. There are though some cases in which inquiries may pose a greater impact on the FICO score if people barely have a credit history or they have a few accounts. Statistically, it seems that individuals with a minimum of 6 inquiries have a chance of up to 8 times of declaring bankruptcy soon, compared to individuals who have zero inquiries.

Even though generally inquiries play a part in assessing risk, their role is minor. Score is mostly affected by how timely you pay your bills and your debt burden.