New Credit Standards Not Really Worth Your Worry

Bankrate.com recently posted Good credit score of past not so good now which opens with the following:
“Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score. That was then. This is now.”

The article goes on to warn readers that while you might have sparkling credit it may not be enough to earn you a better lending rate. Reading this article could put fear into the hearts of would be buyers or at least make you feel like things are really spiraling out of your control. But, just how bad is it?

I asked Coors Credit Union Senior Mortgage Consultant, Ron LoSasso for his take on new credit standards.

So, Ron, how worried should buyers be?

He replied, “Although there are now adjustments in the rate due to credit scores the typical
increase is only an 1/8 to the rate. On a $200,000 loan amount this is an increase of the monthly payment of approximately $16.00 per month. Perhaps the cost of one Grande Latte per week.”

While you shouldn’t be scared off by new credit standards, it is helpful to understand how we got here. The new standards are neither arbitrary nor a result of tightened lending. All banks, brokers and credit unions must abide by the same standards. The change came about as Fannie Mae and Freddie Mac, the nation’s two largest lenders, redefined risk after suffering huge losses last year.

So the new standards really don’t affect the lending landscape much. You’ll still be making fair comparisons when shopping for a mortgage. But, as Ron says, “One advantage to coming to a credit union is to compare all loan programs including these agency type loans to the Portfolio
Loans that credit unions may offer.”

Another advantage is that credit union lending is strong. In contrast to many major banks, very few credit unions were burned by foreclosures; therefore they’re still able to give good rates on home loans.

And don’t let the new score standards turn you into a procrastinator. Yes, if you score is poor or even good you should take some time to clean up errors, pay down debt, or other actions to increase your score. But, if you’ve already got an excellent score of say 720 and you’re thinking of eating ramen for a few months to get it up to 740 you could be taking a big gamble You could miss out on current low rates or while you are working to better your score, you’d only be saving a few lattes worth a month.

The best way to prepare for purchasing a home is to get in and speak with a Home Loan Consultant. They can tell whether your score is in need of help or if you should start shopping now.

Is Your Mortgage Broker Licensed?

More than half of Colorado's mortgage brokers have had their licenses inactivated because they failed to comply with new education and testing requirements that took effect early last month.

This could be trouble for consumers who are working with brokers who are originating loans. If you’re broker is in this situation and you are in the midst of buying a house, you may not be able to close the sale.

Approximately 4,500 brokers have had their license suspended. About one-third of the licenses were held out of state. The educational requirement is a 40-hour class and test. Brokers will also need to pay a $500 administrative fee. Additionally, brokers are required to complete FBI background checks.

To see if your broker has a current license you can check with the State of Colorado or review this list: http://www.dora.state.co.us/real-estate/mortgage/documents/September2009.xls