New Rules for Mortgages.
Written by on April 28th, 2007 in General.
As a result of the “subprime fallout”, there are new rules in the business of getting a mortgage; particularly if you’re a credit-challenged borrower. If you’re not familiar with current events as they pertain to mortgages, and don’t exactly know what’s meant by the “subprime fallout”, here’s the situation in a nutshell. For the past 2 to 3 years, and perhaps as long as 4 years ago, mortgage lenders reached out to credit-challenged borrowers with new programs that essentially relaxed the standards for buying a home with no money down. For a time, borrowers with less than fair credit were able to obtain zero down loans. This might sound good so far, but things happened that caused lots of problems with these loans. It’s a little too long and complicated to recount the whole story and discuss all of the factors involved. But, the end result was that many of the borrowers who obtained these loans started defaulting on their payments. Soon, foreclosures followed in very high numbers, and the lenders who made these loans found themselves in serious trouble. A large number of these lenders have gone out of business because of this. And, this is what prompted the new rules of the mortgage “game”. While these new guidelines aren’t etched in concrete yet, new universal standards are beginning to take shape. Before the subprime fallout, borrowers with midscore FICOs down to 580, and who could document their incomes, could obtain zero down, interest only mortgages. Now, that magic FICO score is in the low 600s… with 600 being about the lowest acceptable FICO midscore number. Many lenders have put the minimum FICO at 620 for zero down. For a “stated income” loan, the new minimum FICO score seems to be 640. Since these standards are rapidly changing with modifications and new policies being added every week, it’s best to talk with a Mortgage Match loan consultant for the most up-to-date information.