Those great mortgage rates require higher than ever credit scores
Great Mortgage Rates Require Than Ever Credit Scores
Interest rates can hardly go any lower, but this year 75% of Fannie Mae mortgages go to those with sterling credit scores of 750-775, up from less than 5% before 2005. Great mortgage rates go to FICO scores of 760. For great mortgage rates 760 is the “new black” as they say. Feds are now claiming more lenient approach as of May 2014! Apparently overreacting to a slowing housing rebound has scared some policy makers into easin strict lending standards, at least for a while.
Many are Locked Out of Great Mortgage Rates
The median score, according to FICO is 711. Most of the population is locked out of great mortgage rates. Borrowing costs more, even for those with a 20% down payment and a fine FICO score of 730. If a borrower has a 630 score, forget great mortgage rates. If they can even find a loan they can expect to pay cruel additional costs of 1.5%. You have got to be worried about approval for great mortgage rates with a FICO score of less than 680. Even a score of 700-725 costs an extra 1/4 of a percentage point.
Fannie Mae and Freddie Mac essentially finance 75% of all mortgages by purchasing the loans from the banks, thus shaping how much it costs to borrow.
Keep These Fine Points in Mind for Great mortgage Rates
I recently corrected The Wall Street Journal on the matter of closing unused credit cards. This usually will lower your score. Closing them does not lower the average age of your accounts as many people think. What it does do is lower your very important debt to available credit ratio.
Some Thoughts on Debt to Available Credit
The percentage of debt you have outstanding is measured against your available credit for 30 percent of your credit score. If you have $1000.00 in available credit and you owe $100.00 you have a fine 10 percent ratio. If that available credit is spread between 2 cards with a $500.00 limit and you close one you now have a poor 50% debt to available credit ratio. Your income has nothing to do with this. Paying down credit card debt before the statements are closed each month is the fastest fix for your FICO
. Keep the credit cards active enough that they report timely payments every month. Charge a little gas or Chinese take out to keep them active and always pay on or before the due date.