Credit scoring is one of the most misunderstood factors of mortgage banking. The algorithms that go into it are complex in nature and to make matters worse, there are actually 49 different FICO (short for Fair Isaac Corporation) modeling scores available. Fannie Mae & Freddie Mac only accept 8 of those scoring models, so many times when consumers are getting their scores online, they are getting a less conservative FICO score than the agencies will accept. In some cases, these models can be based on a completely different scoring system. Therefore, most times when your New Jersey Mortgage Lender runs a credit score, the scores will be lower than what consumers are pulling online for themselves.
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Related FAQs
What is a Hard Credit Inquiry vs. a Soft Credit Inquiry?
A “soft credit inquiry” is a financial background check that does not affect your credit score. A “hard credit inquiry” is a more involved investigation of a buyer’s credit and finances. Additionally, hard credit inquiries also can reduce a buyer’s credit score by three to five points or so.
What is a USDA home loan?
The United States Department of Agriculture (USDA) home loans are intended for rural homebuyers and allow for lower down payment and more liberal credit requirements in an attempt to encourage development in rural areas. In fact, there is no down payment for a USDA home loan. There are however county-based income restrictions that are applicable for qualifying.
What is a conventional mortgage?
Mortgages are generally referred to as conventional mortgages if they are supported and backed by the credit guidelines of Fannie Mae or Freddie Mac. These are the government sponsored private corporations which set the standards and guidelines for most originated mortgages in the country today. Examples of non-conventional mortgages would be VA loans, FHA loans, and Jumbo loans where the
What disqualifies a home from using USDA financing?
Since the USDA program was designed with rural housing development in mind, the location of the home must be in a USDA eligibility zone. If not, the property will be ineligible for USDA financing. Click here to see if your property qualifies. In addition, there are maximum income eligibility restrictions with USDA financing. Click here to access the income eligibility
What is a second mortgage?
A second mortgage (otherwise known as a “junior-lien”) uses property as collateral that already has another loan secured by the same property. The lien takes a subordinate position to the primary lien in the event of foreclosure, resulting in higher risk and consequently less favorable terms and rates. Typical examples of “second mortgages” are home equity lines of credit or
Is mortgage interest tax deductible?
The simple answer is it depends. In 2018 with the change in tax laws and significant increase of the standard deduction, many individuals who would have been able to itemize mortgage interest as a deduction in the past became unable to do so due to the use of the standard deduction. This is definitely a question that is best served
What is the “debt-to-income ratio?”
The debt-to-income (DTI) ratio is the ratio of your total housing and debt payments (including installment and revolving minimum monthly payments) divided into your monthly gross income. This information is often used by lenders to determine borrowing risks.
What percentage of income should go to a mortgage?
While circumstances can vary significantly based upon individual circumstances, most financial planners will tell you to keep your housing payments (including mortgage principal and interest, Property Taxes, Home Owners insurance, Private Mortgage Insurance, and Home Owner’s Association Fees to between 25-35% of your monthly gross income.
Once I apply with a New Jersey Mortgage lender am I obligated to close with them?
Just because you have applied with a mortgage lender, that does not mean you are under any obligation to close with them. In fact, you are able to walk away from a transaction at any time right up to the closing table (and even three days after due to right of rescission laws in the case of a New Jersey
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