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My Credit Plan Blog

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Latest News and Updates

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The fallout for housing and for mortgage continues to change at a quick pace from the Coronavirus. Many are catching their breath from the rapid changes in last couple of weeks. The impact from these changes will be felt primarily for everyone, but especially for those with FICO scores below 680. All prospective home buyers need to know this information.

 

Since the financial crisis 12 years ago, mortgage qualifications have primarily been available to prospective home buyers as long as they had at least a 620 FICO scores. A few were able to qualify for a standard mortgage even with a 600 FICO score.

 

How Things Have so Quickly Changed!

 

Millions are without jobs while others have had their work hours reduced. In addition, Congress has authorized the possibility for many borrowers to skip one, two or even three mortgage payments. The fallout from the combination of these actions means it will be more difficult for future home buyers to qualify for a mortgage. 

 

For most FHA, VA (Veterans), and USDA (Rural Housing) loans, Classic FICO score requirements have been raised to 680 in just the last few days. Conventional loans are still below 680, but the expectation is that will change to higher score requirements just to qualify for a decent interest rate.

 

What Does This Mean?

 

The goalposts have moved. Many potential home buyers will be impacted from these changes. Don’t wait until you start looking to purchase a home, or even hope that sometime in the future, credit score standards will decline. It will take a considerable amount of time before future guidelines settle.

 

Those with less than average credit scores and are in the process of building a new home will find a surprise. You may not qualify when your house is completed. If you are building a home, check your Classic FICO Scores (the ones mortgage lenders use) to verify your standing. If you are below 680, you will probably need to raise your scores before you will be able to purchase your home.  

 

If you are looking to purchase a home within the next year or two, there are really three steps to follow:

  1. Need to check your Classic FICO scores. They are not readily available to consumers – go to MyCreditPlan.org (soft inquiries), go to a mortgage lender (hard inquiry), or go to MyFICO.com (soft inquiries). These are really the only three options a consumer has to access your Classic FICO Scores.
  2. If FICO scores are below 680, work to improve them. A lender may be able to provide a step or two to identify ways to improve your FICO Scores. My Credit Plan gives additional steps to help improve FICO scores – a 53 point improvement for clients in 2019.
  3. Ask questions. If you don’t know, please don’t hesitate to ask a respectable lender who will provide you accurate information.

 

If you are prepared before applying for a mortgage, the qualification process will be much easier – and you will probably save yourselves thousands of dollars. Know exactly where you stand today, and what you need to do to get where you want tomorrow. This is no game. Opportunities will be open to you if you follow these steps. 

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