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Credit score changes in mortgage market could increase homeownership opportunities

“The National Association of Realtors is a strong supporter of utilizing newer, more predictive and inclusive credit scoring models, which we believe will responsibly expand access to mortgage credit and homeownership opportunities to more hardworking Americans, especially first-time borrowers and those who lack access to traditional forms of credit because of ‘thin’ credit files,” NAR President Elizabeth Mendenhall said in a statement to FOX Business.

The FICO model was adopted many years ago, but now the FHFA is asking lenders whether it would be advantageous to open the playing field to other, potentially more modern credit scoring models. The credit scores the FHFA is currently assessing include Classic FICO (current model), FICO 9 and VantageScore 3.0.

Jeff Richardson, the vice president of marketing and communications at VantageScore, says that VantageScore can score more people than FICO. Of the 7.6 million consumers with credit scores at or above 620 who would be eligible for a mortgage, Richardson explained that some have been credit inactive for a while by choice, which could render them un-scoreable by FICO.

A Fight Over the Credit Score Lenders Use for Your Mortgage

Credit scores help determine who gets a mortgage and on what terms. They played a role in the last housing boom and bust as lenders lowered credit-score requirements, extending hundreds of billions of dollars of mortgages to subprime borrowers.

After the financial crisis, lenders tightened requirements for potential home buyers. As part of this, they required higher credit scores, making it more difficult for borrowers with spotty credit histories to qualify for a mortgage.

That is why some lenders, mostly nonbank firms, want a change in the kind of scores that can be used. They would like to increase mortgage volume by expanding the pool of borrowers.

These lenders view FICO scores as an impediment since they tend to be more conservative than alternatives.

Nearly half of mortgage dollars made in the U.S. go through Fannie and Freddie, according to Inside Mortgage Finance, so their requirements have huge sway over the mortgage market.

Nonbank lenders argue the current system shuts out borrowers who don't use credit either out of personal choice or because they went through a bankruptcy or foreclosure. That is where VantageScore Solutions LLC, the scoring firm that Experian, Equifax and TransUnion launched in 2006, says it can step in.

Who is my best mortgage lender choice?

I am 20 years old and looking to buy a townhouse to renovate and resell. I found a house listed for $45,000. I would hope to get at least $20,000 extra to cover the cost of renovations.


Goto your local banks and shop around for a good deal. Also you can try lendingtree.com or similar websites.

Just be aware that if you take out a mortgage in order to flip a property, you need to do it fast!

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