Loans

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HUD Tightens Loan Standards

In Eugene, as in the rest of the nation, lending standards for HUD insured loans—an increasingly popular option for home buyers—are becoming stricter.  The following changes are scheduled or planned to occur this year:

  • Increased mortgage insurance premium—beginning mid-April, the rate will be 2.25%, up from 1.75%

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  • Increased down-payment (10% vs. 3.5%) for borrowers with a FICO less than 580

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  • Reduction of seller concessions from 3% from 6%

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These changes will make it harder for some borrowers to get loans, and will soften demand, somewhat, for house purchases.  However, at least the changes aren’t too drastic.

 

HUD loans are a bright spot in a thorny lending environment.

 

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Loans for Borrowers with 500 Credit Scores?

If the Great Recession has damaged your credit score like so many of us, getting a home mortgage has been nearly impossible.  But—Wells Fargo recently changed their policies to allow people with credit scores as low as 500 to get loans or home mortgages.

Although—to minimize risk—they’re requiring a higher down payment for those of us who are credit-challenged.

Will the other three big lenders (US Bank, Chase and Bank of America) follow suit?  While it’s too early to tell—my guess is yes.

 

Loosening credit: 1 down and 3 to go

 

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Getting a Loan with Low Credit

I recently had a chance to talk with Jared Helton of Infinity Lending Solutions, about lower credit scores and how they affect getting a loan for a house.

Q. Are there minimum credit scores to get a loan for a house?
A. For most products, it is stated that there are no minimums on government backed loans. However, most lenders have instituted minimums.

Q. What are the practical minimum credit score limits for the different loan types.
A. FHA: 580 (a few lenders go to 520)
USDA: 600 (a few go to 580)
VA: 580 (a few go to 520)
Conventional: 620

Q. How do lower FICO scores affect loan pricing?
A. For government backed loans, like FHA, USDA, & VA lower credit scores have less affect on pricing with maybe as little as 0.25% for a lower fico between 580 – 619. On conventional loans, it’s a huge change on pricing. Some rates jump over 1% for lower credit scoring around 620.

Q. Is there a minimum score, below which getting a loan is next to impossible?
A. Pretty much below 520 is private money lenders only.

Q. What are some steps to improve your credit scores?
A. Schedule a review of your credit with someone that knows what they are  doing. I’ve written about it on my web-site too.

Q. Does talking to lenders and doing multiple applications hurt your credit score?
A. That is a huge myth that multiple inquires hurt your score.

All multiple “like” inquiries by mortgage companies made in any isolated 45-day period of time for TransUnion and Equifax (14 day period for Experian) are treated as one single inquiry for the calculation of the score.

Any mortgage inquiry made during the 30 days prior to the current broker/lender’s mortgage inquiry will be buffered out of any impact in the consumer’s score calculation.

Jared Helton, Partner, Infinity Lending Solutions

Jared Helton, Partner, Infinity Lending Solutions