The Average FICO Credit Score For Approved And Denied Mortgage Loans
In the Spring of 2012 I almost had a heart attack and then a meltdown when my bank told me on day 80 of my mortgage refinance saga they weren’t going to proceed. Trading information back and forth for 80 days was already painful enough. To get told almost three months into the process that I would not get the 2.625% 5/1 ARM due to a missed $8 electricity bill from two years ago was devastating!
Capillaries in my brain began exploding as I wondered why my tenants didn’t pay their final electricity bill, why the utility company didn’t send me the bill, and how an $8 bill could crush my credit score from 790 to 680. The plan was to refinance my primary home mortgage before quitting my job while I still had a W2 paycheck, otherwise, there would be no way I could pass the gauntlet.
As a result of this discovery, I had to basically threaten to pull almost seven figures of assets from the bank if they dared to stop the refinance process so late in the game. A senior manager got on the phone with me and said not to worry. He had a connection with a manager at the utility company where my $8 late payment was due. They apparently ate lunch together once a week,
Not one to do nothing, I took to social media and contacted Pacific Gas & Electric through Twitter to highlight my grievances. They responded instantaneously to my request thanks to this post and issued a “Clear Credit Letter” to my bank to remove the penalty. After another 10 days of waiting, my bank finally gave me the confirmation they could proceed. Talk about torture!
Refinancing a mortgage with a traditional bank is even tougher than I initially thought. Before you proceed, take a guess at what the average credit score is for rejected mortgage loans. 650? 675? 700? I think you’ll be amazed.
THE AVERAGE FICO CREDIT SCORE FOR DENIED MORTGAGE APPLICANTS
The average credit score for recently denied applications on conventional purchase loans is 729 according to FICO and the December, 2012 issue of Money Magazine. Anything above 720 is considered “excellent” by most accounts. I couldn’t believe my eyes so I asked my mortgage officers from Citibank and Bank of America for their feedback. They said lending standards are still tight and it is common for those with under 720 to get denied or seriously delayed.
Getting denied a refinance or a new mortgage loan with a 729 credit score is like:
* Not making the varsity basketball team after averaging 12 points and 10 assists a game.
* Flipping burgers in Detroit after graduating from the University of Michigan magna cum laude.
* Not getting a promotion after consistently finishing in the top 20% for three years in a row.
* Getting rejected from the Yakezie Network despite getting to know thirty other members and breaking Alexa 200K.
* Having him marry another woman after you spent your entire precious 20s being his girlfriend! (OK, maybe this is worse)
Now that you know banks are denying folks with good-to-excellent credit every day, you’d be interested to know the average credit score for approved mortgages is a whopping 762! Furthermore, the average approved mortgage applicant comes up with a 21% down payment, has a monthly payment equal to 21% of household income, and rocks a total debt to income (DTI) of no more than 33%.
Forget being able to borrow with only 5%, 10%, or 15% down to get the lowest mortgage rate. Banks are enforcing 20% down or more with conservative debt ratios! No wonder why so many silly Billys raid their 401Ks to buy a home!
Unless you’ve got a stellar credit score, the chance of you buying a home or refinancing your mortgage is low. If you do make it through the process with a lower than excellent credit score, your rate will be higher than optimum. During the process, the underwriter will comb through all your finances multiple times in order to minimize their credit risk.
The feeling I went through from days 80 to 90 of my mortgage refinance is like the feeling of being stuck in traffic one hour before your plane is about to take off multiplied by 10! At least if you miss your plane, you can wait to get another the same day.
SCARY HOW LITTLE WE KNOW UNTIL WE CHECK
For the past two years, I thought I had an excellent credit score in the range of 780-800. Little did I know my credit score was slowly being obliterated thanks to an unknown $8 utility payment. That is pretty concerning because I could have also gone for years without knowing someone was using my identity.
Unless you sign up for a credit monitoring service, there are no gratuitous identity theft warnings. If you are about to take advantage of the current low mortgage rates, you had best check your credit score before you go through the laborious process to save you heartburn, heartache, anger, time, and ultimately money.
Five Steps To Take Before Refinancing Or Applying For A Mortgage:
Step 1: Check your free TransUnion credit score online. TransUnion also offers credit monitoring from the three bureaus for a fee if desired. If your credit score is above 720, proceed to step two. If you are below 720, then you’ve got to then go through your past records to see what is keeping your score down. Call your utility company, credit card companies, and any organization that you’ve borrowed from in the past. Make sure there is nothing outstanding!
Step 2: Once you know your credit score or have cleaned up your record, check the latest mortgage rates online. I use Quicken Loans because there’s no obligation and it’s free as well. Given they are online based, they consistently have the lowest rates. It’s not enough to just look at the rates you see advertised online or in the papers. You’ve got to input pertinent data (mortgage amount, estimated house value, income, etc) to get a realistic rate. It’s like going to the car dealer looking to buy that screaming cheap price you see in the paper only to find out the car doesn’t have any options you want or is sold already.
Step 3: Calculate whether the break even period of when the savings of refinancing starts outweighing the costs is equal to 24 months or less. I like to use a two year mark because anything longer is a crap shoot since the median homeownership duration is only 5.9 years. Sure, you can still come out ahead if your break even period is five years and you don’t sell or refinance until the sixth year, but that’s a suboptimal situation. When you refinance or buy a new home, try to have at least a five year time horizon to stay put. The longer the better because that’s how you build real wealth (think how much your grandparents held and made).
Step 4: Get all your documents in order (W2, paystubs, bank statements, etc). Treat the mortgage application process like a job interview. You need to present yourself in the best light as possible. The bank’s number one goal is to make sure you are a responsible person with a steady income to pay back the loan.
Step 5: Lock in your rate and make sure you ask your banker about all fees involved. Don’t let them surprise you with additional fees beyond what is stated. If there is an application fee, make sure you have them clarify whether it is refunded if your mortgage does not go through. They should agree. If not, move on.
Save yourself some hassle and heartbreak by knowing where you stand before you go through the mortgage application process. The process is long and painful, especially with traditional bricks and mortar banks. I firmly believe traditional banks have gone way too far on the strictness curve, and are therefore going to lose a lot of market share to online mortgage companies.
Good luck!
Readers, if the average credit score for approved borrowers is 762, does that mean banks and the government only want the most responsible people to ever own? If so, is this not good for the long-term health of the housing market as 1) everybody does their best to achieve excellent credit scores, and 2) the chances of homeowners welching on their mortgage payment declines, therefore lowering the risk of another housing crisis?
Is there a scenario where you can imagine renters protesting homeowners like the Occupy Movement?
Best
Sam
Sam,
The point about banks making the process “long and painful” is true and sad.
I started with a 5.5 loan about 4 years ago. I have since refinanced to 4 and 3.5 percent.
I know that my rate I’d now high and I should refinance again. However, I dread doing the detailed paperwork and answering all the questions that I know I will need to do.
I’m on vacation now and hope I have the energy in January!
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Financial Samurai Reply:
November 28th, 2012 at 5:59 am
David,
The hardest part is the wait. The more neurotic one is, or desperate for a lower mortgage, the more difficult. I was fine for the first 70-80 days, but when they told me they were going to stop the application on day 80, I had a cow!
Online mortgage companies have made it easier than traditional bricks and mortgage banks I’ve found. But, as this article shows, you still need some outstanding credit!
You might want to start the process now, have the bank work for you while you’re on vacay so that you get at least 1-2 months under your belt!
Happy holidays.
Sam
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Sam, that is just plain crazy. I figured it would have been around 680… no wonder the housing recovery isn’t taking off. A majority of potential home buyers can’t get mortgages… crazy!
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This is so true! It took us 3 months earlier this year to get a loan… and we have great credit and stable W2 income. We’ve now been trying to refi for the last 3 months and still no luck. You would think that with all the above plus equity, putting more cash into the loan, etc, it would be a breeze, but the underwriters are taking issue with my student loans, saying that the DTI is now too high. They weren’t an issue the first time, and I want to say “hello dummy, it’s these student loans that are allowing me to make more to be able to provide this all-important W2 to you!”
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Financial Samurai Reply:
November 28th, 2012 at 8:29 am
That’s the thing! Since my $8 bill was late 2+ years ago, I refinanced between then and my latest refi in 2012. The problem didn’t fester until this year apparently, but they had a record of it, but I guess it didn’t bother them at the time.
Have you checked online for a refi? Or are you going the bricks and mortar route?
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Carol Reply:
November 29th, 2012 at 6:45 am
Yep, I began the search online (actually using QL), but they were the ones who balked at DTI, after which I began using traditional bm places. We’ve been “approved” for months now, but the underwriter keeps coming back and asking for more info. Refinancing is not for the faint of heart, but saving money so we can buy an investment property next is what keeps us holding on.
This has to be a large part of why the housing market is taking so long to recover – if decent credit scores can’t obtain a loan, then how is this going to work?
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Financial Samurai Reply:
November 29th, 2012 at 7:04 am
This is a HUGE reason why the housing market is not recovering quicker. It’s understandable in that many of the big banks were almost WIPED OUT of existence if the government didn’t step in. Good old fashion bank run. But now, the government is the puppet master, so they’ve put in place many more requirements.
The best example is getting a new Good Faith Estimate (GFE) document with every single tiny change in the loan that is probably irrelevant to you. I got about 10 of them in 3 months, each 7 pages long.
But all this is GOOD because: 1) Sooner or later the recovery will come, 2) The upside is bigger, 3) the quality of the upside is better, 4) the chances of another housing disaster in the fortune decreases.
Just gotta jump through the hoops in the meantime!
Looks like the mortgage industry really tightened their rules after 2007, but declining financing for people with credit score of 729 on average might be over doing it (・・?) I think it depends on other factors as well though. It’s good to do research ahead of time and know how the system works if you plan to refi. It’s even better if you have some investable assets you can liquidate just in case things don’t quite work out in the short term like you almost had to do. I think there does need to be some accountability for regulators to decide on who should own a home or not, based on the individual buyer’s credit history, income, and ability to payback the loan, but it’s hard to say where that fine balance is between too much regulation and preventing another real estate crisis. In Canada our rules for mortgage lending is a little different, and our credit scores are not the same as the standard US FICO scores, for example our maximum score is 900 :0) I’m not sure about the US, but up here it is pretty easy to buy a home. In fact, most Canadians are home owners. About 2/3rds of us own the dwelling they live in :0)
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Financial Samurai Reply:
November 28th, 2012 at 8:33 am
Interesting to know about the 900 max credit score in Canada! The max in the US is 850, but that is a “unicorn number” which practically nobody has. In fact, I don’t know many folks with above an 800 score. It’s always like 780-799 or something like that.
Around 2/3rds of Americans own homes as well, but only about 35% own in San Francisco, New York City and perhaps other expensive coastal cities.
729 average for rejection could be overdoing it. I see lending standards relax as the economy gets better, boosting revenue, and profitability for banks. Banks are hoarding tons of cash still. Hence, I’m bullish on a US housing recovering as more liquidity gets injected into the system.
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Julie @ The Family cEO Reply:
November 28th, 2012 at 9:37 am
We refinanced earlier this year and we both had 800+ scores. I was happy to report to my husband that mine was higher than his. :) But all of this makes me wonder of the wisdom of worshiping at the almighty FICO. It would seem like some more manual underwriting would be in order. I don’t know if the banks know what they’re doing now any more than they did pre-2008.
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Financial Samurai Reply:
November 28th, 2012 at 9:59 am
A credit score is like a GPA, GMAT, GRE, or SAT score. It’s one of many factors, but a very important one nonetheless. The reason why it takes SO LONG nowadays to get a mortgage refinanced or approved is exactly b/c underwriters are being super diligent about all other variables. The government is also clamping down hard on banks with Big Brother at the helm.
Anybody frustrated about the mortgage process can blame the government for excessive paper work and checking. We’ve gone from one extreme to the other! At least there’s less of a chance of a housing crisis in the future with better creditors owning!
Nice job on 800!
Wow, I had no idea that a measly $8 electric bill could wreak so much havoc. When I applied for a loan this past Summer, my average credit score came in at 760, which I thought was pretty good, but I guess only “average” in this new mortgage environment.
Still, the good news for me was that I was able to get that “high” score without ever making a conscientious effort to build it up. That is, it was obtainable by basically just paying bills on time (and being lucky enough to not have any anomalies show up).
The real estate market in general is pretty fierce right now. Depending on your area, I’d be surprised that 21% downpayment can get it done it the prime locations. I’ve lost way too many deals to all cash offers… which turn out to be legit b/c you’ll see the property go straight from listing to sold…they go from open to close at a blistering rate. Hard to compete with these folks.
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I’ve never thought about renters protesting but I guess they could. They’d certainly have nowhere to live then. lol.
We are in the process of refinancing and our credit scores are over the 729 mark, so I’m hoping we don’t have much to worry about. I just sent over all of our documents today and I’m eager to see how long this process will take.
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Financial Samurai Reply:
November 29th, 2012 at 7:10 am
Let us know how it goes! I’d be interested to hear the length it takes and the rate you got.
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I don’t think this is a hard and fast rule, a friend of mine just purchased a house with a credit score in the mid 600′s, he closed on the loan in about 45 days, it was an FHA loan, he only put down 5%.
He is a Doctor though, just coming out of his residency, so his upside on the incoem is better then most, but he is burdened with a lot of debt.
My most recent refi this summer took about 60 days, both my wife and I have 800+ credit scores, the delay was in the backlog of applications, we were approved almost immediately required very little paperwork, it just took forever to get the clear to close.
Both my friend and I went through brokers and got locked in through a major bank through there wholesale channel, wholesale and warehouse lending usually has slightly less strict requirements and better rates, never go to the big banks directly.
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Financial Samurai Reply:
November 29th, 2012 at 7:10 am
There are no hard and fast rules. However, when checking your credit score is now free and takes just minutes to do online, then the hurdle is much lower, so I say why not.
Your 600′s doctor friend is an outlier… but then maybe not, b/c he is using a gov’t assistance loan. And refinancing with a 800+ credit score is great, but that’s not very helpful b/c most people don’t have 800+ credit scores.
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Jay @ effumoney Reply:
November 29th, 2012 at 9:22 am
The credit score was made because my 800+ took 15 days longer to close then his mid 600′s.
I spoke to my next door neighbor last evening (he is president of a mortgage brokerage firm), he told me underwritting guidelines are geographically tied to real estate markets and unemployment rates, in NY the real estate market was not hit anywhere as bad as say Florida or Nevada, so lenders are less strict with there credit scores here and then profession is taken into consideration as well Doctors have much more recession protection then equivelent paying jobs. I would have though my job would have a negative impact as I work for Wall Street and they always talk layoffs however, the Street is profitable so it is actually another bump up.
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This is depressing — I can’t get a $200 charge off my credit report — and you were hit HARD by $8!
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Thanks for the insight! We often talk about credit scores as though it is the prize, but I see it differently. A high credit score gives you choices! If a lender is dragging their feet or is unwilling to provide the loan, I can go somewhere else. I use my credit score as a negotiable instrument. It is as powerful as cash or wealth. Actually it is wealth, it is what rich people have and others do not. Access to capital and a pristine credit score is very powerful.
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We just closed our ReFi and found that I have finally broken the 800 mark with our Credit Score. our process was smooth and painless (luckily). Our break-even is just under 3 years, and once PMI is gone, we’ll be saving $525 a month! In 2010, we were able to borrow with 3.5% down, and had a very quick process. It sounds like they are tightening up even more since then!
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Financial Samurai Reply:
November 28th, 2012 at 6:06 pm
Wow, I’m shocked you could buy a home with only 3.5% down. Do you mean that is your interest rate? If not, is this a special assistance mortgage eg FHA or something?
2010 was a difficult time to get approved!
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Jacob @ iheartbudgets Reply:
November 29th, 2012 at 1:24 pm
FHA mortgage, 3.5% down payment, locked a 5% rate. Just ReFi’d at 3.25% :)
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Financial Samurai Reply:
November 29th, 2012 at 2:00 pm
Nice. I figured it was an FHA mortgage. Why, oh why doesn’t the government provide benefits to ALL tax paying American citizens, instead of just some? Isn’t that discrimination?
Jay @ effumoney Reply:
November 29th, 2012 at 8:23 pm
FHA is not a free money program; it gives many people without other recourse the option of home ownership. But it comes with a price, first a large upfront premium which is generally rolled into the loan, so you are diluted down further than the 3.5% you put down. Then there is the monthly premium which included (PMI) and if I am not mistaken there is an FHA premium. So you monthly payment is PITI plus PMI+FHA premiums, you have to escrow your insurance and taxes, so you are prepaying those bills 6 to 12 months early earning next to no interest (most people do this anyway though). The higher payments with the extra premiums make it harder to pay down your balance quicker. Lastly you are locked in for a period of time where you can’t refinance. FHA is a great option if you have no other options, if you can qualify for a traditional mortgage FHA is never worth it.
The government does help all or most mortgagees, over 75% of all mortgages originated in 2011 and 2012 were bought by Fannie or Freddie which are still in conservatorship of the US government, if Fannie or Freddie won’t buy your mortgage then it is unlikely you will get the mortgage or if you do the rate will be through the roof.
Just saying…
Man, I really should have hopped on board when banks were giving away homes to anyone with a heart beat! (ie. before the bust) I completely missed out on easy terms. ;) Now, I have to work my butt off to increase my credit score by another 50 points (oh, the agony!) and save that stupid 20% down. Ugh!
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Financial Samurai Reply:
November 29th, 2012 at 7:05 am
In the long run though, it’ll be good for you and everyone! But, we’re all dead in the long run anyway.
I do believe lots of people will kick their own butts for not buying in 2009-2011. When things heat up, the herd runs in a hurry!
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Ugggh! I think the whole credit score debacle is absolutely absurd. I had a professional argument with a loan officer a couple months back. They value a tiny score over your current job, assets you currently hold, or your record. A measly $8 bill is ridiculous when it comes to determining if someone is a worth candidate of a loan. If I was a loan officer (in the perfect world) I would contact the individual myself and tell them they had a $8 charge that was wreaking havoc. This system is so broken…
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Financial Samurai Reply:
November 29th, 2012 at 7:05 am
This is why each of us must FIGHT for our financial health. Nobody is going to look out for us better than ourselves. We must take ACTION to save money and make money.
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Not being able to refinance your mortgage because of a missed $8 electricity bill from two years ago is just too much! However, I think that average credit score and down payment is skewed quite a bit. I’m sure it doesn’t include people who borrow via credit unions, FHA, VA or other city/state/county home ownership initiatives.
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Financial Samurai Reply:
November 29th, 2012 at 10:14 am
Not sure.. but only special people can get FHA and VA loans. The score is the score which still shows how high the average rejectee’s score is.
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Daniel Reply:
December 4th, 2012 at 8:47 am
FHA loans are open to anyone who meets the lending requirements. FHA lending requirements are less strict than those for conventional loans. For example, the down-payment requirement is 3.5%, as opposed to the 20% for a conventional loan. The credit score requirements are also lower. There are lenders that will approve an FHA loan with a FICO score as low as 580, though many require at least a 620. You can read about FHA loan requirements at http://wwww.bills.com/fha-loan-requirements/ or at the HUD.gov Web site.
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Financial Samurai Reply:
December 4th, 2012 at 8:56 am
Your article make it sounds like EVERYONE can apply for a FHA loan. To make it simpler, who can’t? B/c last time I checked, I couldn’t and it had something to do with income or not being a first time homebuyer.
Why would we encourage people with below 720 credit scores and 3.5% downpayments to buy a home? That’s like the cash 4 clunkers program in encouraging people to trade in perfectly fine old cars for $24,000 on average valued cars, when the average income is only around $50,000! That’s poor financial decision making imo.
Larry Reply:
December 4th, 2012 at 1:11 pm
I think it’s dangerous for the government to encourage people to buy a home with only 3.5% down. Are you kidding me? People can get wiped out in a nanosecond if they can only come up with 3.5% down in the first place!
Daniel Reply:
December 4th, 2012 at 12:42 pm
Anyone can apply for an FHA loan. A borrower must meet FHA debt-to-income requirements. Currently, the borrower’s new mortgage payment (principal, interest, taxes, and insurance) can’t exceed 31% of the gross monthly income. The “back-end” debt-to-income ratio can’t exceed 43% of gross income. The back-end ratio includes required monthly costs for debts such as car payments, student loans, monthly credit cards minimum payments, and any court-ordered payments like alimony or child-support. There are also other FHA requirements regarding collection accounts, recency of bankruptcy, credit history, etc.
I don’t know why you could not do an FHA loan but could get approved for a conventional loan. FHA loans are not restricted to first-time home-buyers. It could be that the conventional lender looked only at your combined DTI and that your mortgage payment itself, which may be your only debt in your DTI, was higher than the FHA requirements.
Of course people should not extend themselves beyond their means to buy a home. But how their new mortgage payment compares to their costs to rent and whether appreciation is likely to take place need to be weighed. FHA loans do come with higher mortgage insurance, so a borrower needs to factor that in. Each case needs to be judged on its own merit. To state that borrowers should not use the FHA to finance a purchase due to its low down-payment requirement is not good advice.
By the way, I see I typed the link to our FHA requirements article incorrectly, in my first reply. I should have put http://www.bills.com/fha-loan-requirements/
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Wow that is a much stricter threshold than I would have guessed for denials. Sheesh that’s nuts. It makes my blood boil that there are criminals out there who steal people’s identities and destroy their credit but it’s a reality we all have to face. We really need to be disciplined and check our credit reports and scores regularly.
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Financial Samurai Reply:
November 29th, 2012 at 10:13 am
Identity thieves need to be publicly caned as they do in Singapore for vandals.
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“In fact, I don’t know many folks with above an 800 score. It’s always like 780-799 or something like that.”
I ran into this situation earlier this year. I wanted to open a HELOC through my local bank and they sent me a copy of my credit score: 799. I was really bummed I couldn’t get ONE more point to make it an even 800. I’m not sure how I can get it to go up that extra point. I think the main thing is length of credit history (I’m 30). I’ve had a credit card since I was 17 and never been late on a payment, but unfortunately that first card I had closed the account due to inactivity. My average account has been open about 7.5 years now, with the longest at 11 years. I’ve also never had a mortgage or car loan. Perhaps lack of credit types or number of credit lines is a factor as well. This HELOC is the largest credit line I’ve had. Maybe after having it in good standing for a couple years my score will tick up a few points. Not sure why I really care, other than it would be fun to break through that 800 barrier.
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Financial Samurai Reply:
November 29th, 2012 at 10:13 am
Travis, I have the same thing.. 799 for one of my credit scores. I think it really is duration of credit history. The several people I do know who have 800+s are in their mid 40s or older.
Don’t go crazy with that HELOC now ya hear?!
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Travis Reply:
November 29th, 2012 at 2:32 pm
Don’t go crazy? I thought houses are supposed to be used as big ATM machines. I was planning on taking a couple around-the-world trips, then buying a Mercedes when I get back. Isn’t that the American way? Ha.
The HELOC is only for investment purposes. I am loaning to a local contractor at 9% and 2 points while my HELOC is at 3.74% and 0 points (didn’t even cost me a dime to set up the line). I require the contractor to own the lot outright as collateral to start with, then loan in installments as the construction is being completed, just like a bank does. (And I get lien releases from his subs along the way.) It makes for a safe investment with a pretty decent return. Figure on three $200,000 loans in a year, I’ll pay about $7,500 in interest and receive about $30,000 in interest and points. It’s not quite that high on either amount since there is some “downtime” with the money. But, when the money isn’t being used, my HELOC sits at a $0 balance and I don’t pay any interest or fees.
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Financial Samurai Reply:
November 29th, 2012 at 2:38 pm
Make sure you know where your local contractor lives………….
Travis Reply:
November 29th, 2012 at 4:26 pm
I do. I live six houses down from him and the houses he is building are a couple blocks away, so I can walk over and keep an eye on the progress.
Several of the subs the GC uses are the same ones I used on my own house, so that helps put my mind at ease as well. I like to make sure he is using good/reputable subs and the house plans he’s using are what’s selling in the area.
I can’t imagine how much faster we’d be recovering if banks would lighten up on their lending standards. Bernanke’s words on the issue are pretty strong…economic recovery would come quite quickly if housing activity picked up.
Banks are too picky because they can be. I think something like 80% of activity is all refinancing activity. That’s easy money for bankers…at least it should be. So, until that works through, something tells me they’re going to have virtually no incentive to stick their necks out there to make more money.
Will renters protest like Occupy? Ha – I could see this happening if hedge fund interest in homes makes a bigger slice of the pie. I can’t imagine people being very thrilled to write a rent check to a hedge fund each month.
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Financial Samurai Reply:
November 29th, 2012 at 11:07 am
It’s already happening! Billions of private equity/venture money has gone into buying up foreclosures! Occupy Homeowners movement is coming!
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Just got quoted 3.35% for my 30 year fixed. The amount of info requested, re-requested and then updated after the first request is stale is amazing!
I really think this is a natural occurrence after any big event where the pendulum has swung the other way. Eventually they’ll find a happy medium and it will be business as normal.
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Financial Samurai Reply:
November 29th, 2012 at 12:20 pm
That’s not bad for a 30 year fixed. Expect the underwriter to ask for documents over and over again!
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The process has gone very smoothly for me. I am so far quite surprised that there are not more questions, although our scores and debt ratios are excellent.
3.25% 30 years with no points
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Financial Samurai Reply:
December 3rd, 2012 at 9:08 pm
What is your credit score so we can understand your situation better?
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The lowest was 767, but the other 5 (joint application) were much higher.
I believe the biggest factor to be that our debt ratio is only about 20%. Had rates been higher, then the larger payment would have increased this ratio. This could be a once in a lifetime opportunity to buy the house you need for the next 20 years at artificially low rates. Since inflation is almost 3%, borrowing at 3.25% minimizes the actual costs.
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Having bad credit will really hurt you in your life. Even if you get approved for a loan you will be paying hundreds extra due to high interest rates. The biggest suggestion I have is to get your credit score fixed through Lexington Law. My life is so much better now as a result.
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Great column! And things still have not changed. Email or call me if you get a chance please Sam — I have a question for you.
Scott Reckard
Financial staff writer
LA Times
949 280-7046
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I do agree that keeping a careful watch on your credit report is a good idea. I also like the idea of being able to play with the variables to quantitatively determine the effect that changes have on your credit score. I recently stumbled upon a FICO Score Estimator that allows one to do just that. http://www.bankrate.com/calculators/credit-score-fico-calculator.aspx
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