|By John Lovett, Times Record, Fort Smith, Ark.|
|McClatchy-Tribune Information Services|
The 580 credit score with 3.5 percent down has been an FHA-backed loan minimum, but most banks have stuck to 620 or even 680 credit scores as a precaution in these days of Great Recession recovery.
Scores on purchase mortgages stood at 755 in March, down from 761 a year earlier, according to mortgage-software provider from
Average credit scores on purchase loans closed through a consortium called
Home ownership is widely viewed as a stabilizing factor in society. Much of this, however, is predicated on job security. As the job market picks up, which it appears to be doing, so may home ownership.
The unemployment rate also fell to 6.3 percent from 6.7 percent, the lowest since
"Owning is what strengthens neighborhoods," said SWBC Mortgage Branch Manager
Catalano said FHA loans, although they may require a mortgage insurance premium (MIP) are still "favorites of first-time homebuyers."
The annual mortgage insurance on an FHA loan is 1.35 percent of the loan amount, divided by 12. The monthly insurance on
At least with Catalano, more young professionals coming out of college are showing more interest in buying a home. And this impresses her. According to Bankrate.com, borrowers can use their own savings to make a home down payment. But other allowed sources of cash include a gift from a family member, or a grant from a state or local government down payment assistance program.
"If you have a credit score below a 660, you would not be able to finance 95 percent," Lau says. "Typically, your credit score and your down-payment availability would help a loan officer determine what type of loan you need to be in."
Credit scores have always been important, but even more so after the mortgage meltdown in 2008 with the Dodd-Frank Act and bank reform. A potential homebuyer's DTI, or debt-to-income ratio, is also a deciding factor, possibly more than the credit score.
Lau says the
It becomes "very frustrating," Lau said, when someone has to wait three days to close because a reduced fee caused his or her Annual Percentage Rate to go down. The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.
"If the APR goes up or down .125 percent, you have to re-disclose and wait to close," Lau said. "How does that help a family who is trying to get into a home?"
For a limited time, according to the
Mortgage rates have risen almost a full percentage point since hitting record lows about a year ago.
According to FHA.gov, the department of the Housing and Urban Development Office is the "largest insurer of mortgages in the world with over 34 million properties since its inception in 1934." It is also the only government agency that operates entirely from its self-generated income. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program.
FHA mortgage insurance is not permanent. It can either go away on its own, or can be refinanced away. For homeowners whose FHA mortgage pre-dates
To qualify for a conventional mortgage, a borrower generally needs a minimum credit score of 680 and at least 5 percent down. Many lenders require at least 10 percent down.
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