Q. Our credit is not the best, but we’d like to take advantage of this buyer’s market.  Are there any mortgage options left for us?

A. If you fall within what is called “subprime” territory (a FICO score below 620), your options will be limited.  Your best choice is FHA, which does not solely use credit scores.  They’ll want proof that credit problems won’t reappear. You’ll have to write a detailed letter of explanation to show the cause of your credit issues and how these issues will be avoided in the future.   If your credit score is above 620, but below 680, you may be able to work for a better option.   Ask one of our mortgage specialists if he or she can recommend some things to improve it.  Scores below 680 are going to cost you money because Fannie Mae and Freddie Mac are moving to risk-based pricing.  For example, a 660 credit score will require an additional 3/4 of a loan discount point, which roughly translates to a 3/8% higher rate.  A 625 score will require an extra 1.75 points, which raises your rate by 3/4%. 

This entry was posted on Tuesday, March 4th, 2008 at 11:01 am and is filed under 1) Questions for Loan Officer, 2) General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.