Yes, some people are still buying real estate.
Yes, some of these people are still taking out loans.
And they are wondering how their past credit histories will affect their loans’ interest rates.
Here’s how it all goes down:
The measurement that most lenders use to assess applicants’ credit risk is the FICO score developed by Fair Isaac Corp. The score ranges from 300 to 850.
There’s not one FICO score. Buyers have three: one for each of the three credit bureaus, Experian, TransUnion, and Equifax.
Each credit score is based on information the credit bureau keeps on file. Since credit bureaus don’t share their data with one another, the three FICO scores may differ, sometimes by as much as 100 points.
The components of a FICO score are:
* Payment history: 35 percent
* Amounts owed: 30 percent
* Length of credit history: 15 percent
* New credit: 10 percent
* Types of credit used: 10 percent
A consumer with a 580 credit score might qualify under FHA requirements, but, generally, in order to qualify for a prime loan, a borrower must have a credit score above 620 for a conventional loan at all and above 720 for a loan at terms and rates most borrowers would consider desirable.
Well, it’s irrelevant whether or not you would qualify for an FHA loan, since the borrowing limits on those loans are so low, you’d probably not be able to use one of them to buy a condo here in Boston.
Credit Score Primer: What Buyers Need to Know to Get a Loan – By Pamela Yip, The Dallas Morning News, by way of Realtor.org
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Updated: 1st Q 2018
