HomeLoans Blog

It seems to me that one of the most important aspects of the recent changes in the mortgage industry is the return to lending fundamentals. The key question in underwriting has been whether the loan could be sold to an end investor. This is still the key question, but now the answer more requires the borrower have sound fundamentals in the 3 C's (Character, Collateral, Capacity).

It is no longer the case that higher rates will justify lending to a borrower with poor credit characteristics. A low LTV is not even a guarantee of a loan. Some hard money lenders are not real free with their money. Neither does a good credit profile justify ignoring other factors in evaluating willingness and ability.

Even in this "mortgage crisis," most home owners are paying their mortgages. They are credit worthy, but for this majority of credit worthy home owners, even when they qualify for a loan, the final loan terms will based on credit tiers.

Consumers need to understand this. Conventional loan rates, and probably soon also government loan rates, vary according to the credit score level. MI rates have a credit score component in pricing.

Borrowers must understand this credit scoring system and they must manage their credit. It is more important now than it has ever been. It truly requires the assistance of a credit expert.

But beware of seeking help from the wrong credit counselor, who may charge a large fee and produce no results, or worse negative results.

A good place to begin is with the free annual credit report -   https://www.annualcreditreport.com/cra/index.jsp .

But going it alone can be time consuming and frustrating, and can actually produce negative results (a drop in the score). I highly recommend that consumers get competent professional help.

To improve a mortgage score, my suggestion is to see an experience mortgage professional.