Great post by a fellow ActiveRainer. His pointing out that Credit Scores alone can not be used. Underwriters will look at more than just them.
From the consumer - "I have bad credit".. "my credit is so so"... "my credit is good". "My credit scores are good", etc, etc. I have heard it all and just this alone doesn't make or break you as a potential buyer when wanting to buy a home.
The thought process of an average loan officer - "Yippie, my borrower has a 635 credit score and my company's cutoff is 620. This borrower fits the credit ratios also, so I can do the loan."
Knowledge is power people. I know some loan officers in the past that made the mistake of primarily looking at the credit score, aka the fico score,and if it fit the criteria, that they thought they had a good loan. Many would miss some lates on the credit report. And yes, some even missed judgments and or collection accounts.
A good loan officer is going to understand how credit works, what to look for, and know if they need good credit explanations. Also to show documentation to prove such explanations, and sometimes compensating factors.
Summary : I bring this up because I currently have a borrower who has a middle credit score, fico score of 638. She originally started the loan application process with another lender in the beginning of May. Well, this lender not only missed 2 commitment dates, but the closing date of June 30th. This is a very tough FHA loan, even though she has a credit score of 638. She has a Ch. 7 bankruptcy that was discharged in June of 2003. But after this, she had a voluntary repossession of a car in 2008, which totals $10.800. Yes, this will have to be paid off. Her credit outside of that? Just one credit card that she has had for 1 year. And I have qualifying ratios of 38/48. But yes, I have several excellent compensating factors, such as canceled checks for rent and a car that someone else bought for her, and about 2 years worth of cash reserves. And the fact that she has been on her job for 9+ years and her mortgage payment to only increase by 12% more than her rent payment.
Overall, the worst part was that the other lender came back to her about a week ago and said, "sorry, we can't do your FHA loan because your credit score doesn't meet our criteria." Not every lender can do every deal. Her credit score never changed. To me, just a loan officer or lender saying... it was a hard deal and we didn't review the facts upfront, when we gave you a pre-approval letter.
My advice? Just be careful of loan officers that promise loans to those with bad credit or less than perfect credit. And those that make it sound like FHA loans are good for those that have bad credit. You need the knowledge of a good loan officer and a good lender such as Infinity Home Mortgage, that has common sense underwriting, and to put the pieces together.
Those with less than perfect credit or low credit scores - Please don't hesitate to reach out to me. I would love to help you and show you how to get your scores up.
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