Though some of us pay close attention to our credit score, others are completely unaware of this measurement. Even more do not realize that just a few unwise moves like failure to repay cash advances can devastate the credit score.
People with a few blemishes on their credit report often learn this when they begin exploring home financing.
The credit score serves as a key indicator of whether a consumer will repay debt. Those with a better credit score have access to more financing options. This indictor is relied upon by many industries, namely the mortgage sector. Some people qualify for a mortgage only to find out just weeks later that they are no longer considered candidates under the program.
Not long ago, a credit score of 620 opened to the door to a conventional mortgage loan. If a borrower could not make a 20 percent down payment, the lender offered to supply monthly mortgage insurance for an additional fee or required a second loan. The lender of this second loan held the most risk and when the credit crisis hit, much of this secondary financing went the way of the dinosaur.
Now, consumers are finding it more difficult to obtain mortgage insurance. A person with a credit score of 659 or less who wants to put under 20 percent down on a home should look at products other than conventional loans.
Mortgage insurers suffered at the hands of borrowers whose credit scores were 620 to 659 and are now more restrictive.
Homebuyers with a credit score of about 640 may find a solution in FHA financing. Lenders are often not willing to consider scores as low as 620 because the loans do not generally perform as well. HUD will analyze such loan and pass whatever portion of the loss it can along to the lender that originated the financing.
