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What is a FICO Score?

FICO scores are numeric representations of your credit profile. The higher the FICO score the better credit risk you are. FICO is a product of Fair, Isaac Company. These have been around for several years but started to be used in the mortgage lending business in 1995 for the purpose of keeping down the expense associated with Home Equity loans. These scores are now used by Freddie Mac and Fannie Mae in conjunction with there automated underwriting systems.

The following is an overview of what constitues a FICO Score: 1.They are based on years of computer modeling aimed at predicting who might be a credit risk. 2.Their purpose is to reduce the cost of examining credit reports and to speed mortgage approvals through the process of automated underwriting . 3.The important negative factors are: bankruptcies, delinquencies, credit lates, collections, too many open credit lines, "too much" credit, too little credit history. 4.The score is only as good as the data.

You can get a home with as little as 5% downpayment (there are special cases which do 3% down). If your downpayment is less than 20% of the purchase price, or 20% of the appraisal for a refinance you will need Private Insurance (PMI). The downpayment must be well-documented. That is, you must show, for example, bank statements proving that you have had the money for at least 2 months

Maybe you are thinking of refinancing but you think rates are going to decline some more this year. What should you do? Suppose you have an $250,000 adjustable mortgage with a lifetime cap of 10%; your monthly payment can go to $2,193. Your current adjustable rate is 7.5%, the monthly payment is $1,748 and may go to 8.5% during the next year, your payment will increase to $1,922.

The No-Point No-Fee Advantage: If you can refinance your home @ 7.50 % payment of $1,744 fixed for 30 years you can avoid the risk associated with an adjustable and if rates fall you can refinance once again. Why? By not paying the loan points and closing costs out of your pocket you have the financial flexibility to refinance again and again if interest rates continue to fall and continue to lower your monthly payments without spending anything.

A point is one percentage of the loan amount. The lenders offer rates which may be lower but require paying points. A rate of 6.75 7% with 1 point for a loan of $100,000 would require the borrower to pay a total of $1000 to the lender upon approval of the loan. A rate of 7.125% with 0 points will require no payment to the lender but the interest rate is slightly higher. Points will lower rates and are of benefit if you have some cash to lower the rate and intend to keep the loan for its full term.

The loan process can take as little as two weeks providing all of the proper information is received at the time of loan application. The more information that is provided at the beginning of the loan, the faster we can process that information and have the loan underwriter approve your loan.

The most common items needed are: Last Two Years Tax Returns, Recent Paystubs, Two Months Bank Statements, Mortgage Holder or Landlord Address and Account Number, Last Credit Card Statements if Balance is Carried Forward.

The rates you see on this web site are always quoted (unless otherwise noted) for 30 day rate locks. The interest rate on your loan is not set until we fax a "Rate Lock" form to the lender and receive confirmation that they have received it. The loan must fund before the "lock expiration" date or you can lose your rate lock. When we are locking your rate and discussing the lock expiration date it is important that both borrowers be available to sign the documents. You must tell us of your vacation and travel plans. If one borrower will be out of town we can have a "specific power of attorney" prepared so that the other person may sign for both.

Preapproval is a step beyond prequalifying. In a preapproval we send the credit part of the loan package to the lender and get you approved for a certain type of loan with a particular lender before you have found or made an offer on a property.

With a preapproval you can close the loan faster and often will find your offer more acceptable to the seller. Sometimes sellers are anxious and will take somewhat less in price from someone who can close quickly.