Good news for Bay Area buyers: Fair Isaac Corp., the company behind FICO credit scores, is urging lenders to lower the minimum-score requirements for home loans.
Fair Isaac says the high credit-score “cutoffs” that mortgage lenders imposed during the housing crisis are tighter than necessary. That’s according to veteran real estate columnist Kenneth Harney.
FICO credit scores
that were considered acceptable risks for mortgage applicants in the early
2000s — the 640 to 680 range — were exceedingly rare until recently. FICO
scores run from 300 to 850, and most buyers in the first quarter of 2014 needed
scores higher than 700 to get their home loan approved.
We reported in this
this blog last month that lenders have started to loosen their credit requirements, and Harney confirmed
in a recent column that Fair Isaac’s own researchers found that the risk of
default on more recent borrowers is much lower than it was at the onset of the
recession.
In 2005, for example,
36 borrowers with a FICO score of 700 paid their loans on time for every
one who went into major default. In 2011, however, 91 borrowers paid their
loans on time for every one who defaulted — a big decline in risk to lenders.
Researchers at
VantageScore Solutions, a Fair Isaac rival, found similar results. The company
concluded that mortgage lenders could safely expand the pool of homebuyers by
lowering their credit-score requirements — without loosening up on other
standards of down payments or debt ratios.
Earlier this year,
Wells Fargo, the nation’s largest mortgage lender, cut the minimum acceptable FICO score for conventional
loans from 660 to 620. In addition, it lowered score requirements for
Federal Housing Administration loans to 600.
Other lenders have
also trimmed their FICO requirements. With mortgage rates still at historically
low levels, it looks like there will be no shortage of buyers bidding for the perfect Bay Area home throughout 2014.
If you plan to buy
a home in the Bay Area or the Tahoe/Truckee region, Pacific
Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make
your purchase a success.
Contact me today for a consultation. I will be happy to answer any questions you may have, and/or help you find your dream home.
Saraya and Simon Motley
Pacific Union and Christie’s International Real Estate
Serving Alameda & Contra Costa Counties
510.459.4338/direct . 925.385.8503/direct
925.403.7802/eFax
saraya@eastbayhouse.com
www.eastbayhouse.com
CalBRE License #01265873
Pacific Union and Christie’s International Real Estate
Serving Alameda & Contra Costa Counties
510.459.4338/direct . 925.385.8503/direct
925.403.7802/eFax
saraya@eastbayhouse.com
www.eastbayhouse.com
CalBRE License #01265873
(Image: Flickr/401(K) 2012)
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