“Lowering Credit Score Requirements, Does NOT Mean Loosening of Guidelines”

Lower mortgage volume is the main reason many lenders are dropping the allowable credit scores on most mortgage products. I can tell you that doesn’t mean that guidelines are being relaxed. Actually just the opposite, the lower the scores, the more challenging the guidelines are going to be.

A few months ago a Realtor referred a client that was selling a home and was downsizing. Selling for $340,000 and after the payoff of the existing mortgage and costs of sale this individual will have $110,000 to put toward a new purchase. The Realtor wanted to show him a home for $225,000. All sounds simple, not really.

This person had a mid-credit score in the mid 500’s. Some of the reasons made sense, others not so much. It took almost three months to get this loan in a position to close. So, as you can see, even putting 50% down, doesn’t guarantee a mortgage at a decent interest rate. In this case we got him a 5% mortgage, all the way to the closing he was complaining about the rate.

Now that he has gotten a fresh start, paying his obligations on time will be normal, rather than a reflection of past history.