“The New Subprime, What Does that Mean?”

One announcement after another from lenders reducing credit scores. Just last week one lender will now go down to 540 and the other at 550 for FHA loans. Before everyone starts going crazy that we will be heading for another mortgage and real estate meltdown, get that out of your heads.

There are situations that warrant a mortgage for a client with lower credit scores. Dave (his actual legal name), purchased a home in 2003 with a girlfriend. The relationship went bad and his girlfriend moved out, however she had his social security number and got a couple of credit cards, using his SS number. When she stopped paying, the credit companies when after him for payment.

You can imagine, he told them to go pound sand and wasn’t going to pay. Dave is a hard working guy, makes decent money, but unfortunately doesn’t read and understand much about how things really work. He went to see an attorney, who sent him to me. When I met with him, my heart went out to him. His credit scores were low, but if anyone deserved, he did. I was able to find a lender that would do the refinance.

The attorney negotiated a settlement with the two credit cards companies and worked out a settlement with the girlfriend, in order to get her off title and we completed the refinance.

 Dave had a 566 mid score and this is a perfect reason for some lenders to offer lower credit score mortgages.