By Matt Joy, Princeton Mortgage Wholesale
Photo by Alex Mertz on Unsplash
A new two-part series from National Mortgage News is investigating the gravitas around mortgage lenders and our assessment of a borrower’s credit score. You can check out the full series here.
Personally, I think this is a very interesting topic as we continue our journey through the new year. With all the talk around housing reform, CFPB oversight easement and a possible changing of the guard in credit score providers, it makes sense that we’re discussing how much weight we place on a borrower’s credit score during a loan review. According to our friends at HMDA, there has been a 2-year decline in credit history being the highest denial reason for mortgages… but is that because we’ve loosened our credit requirements or because borrowers with lower credit profiles have backed off from trying to obtain a mortgage? Unfortunately, the data shows it’s the latter of the two. The data I’m referring to is from the report showing the average FICO for a consumer in the US is 700… pretty good right? However, the average FICO for a borrower purchasing a new home is 745… that’s a pretty significant difference.
So why is there a such a gap? Personally, I think it’s due to the lack of understanding. There are mortgage programs available to borrower’s who have lower credit profiles… consumers just don’t know about them or have developed the perception that because they have a low FICO they won’t be approved. The truth, however, is quite the opposite. Lenders have done a great job in recent years developing a deeper understanding of what works and how to take on extra risk. It’s an education thing. Consumers need to be informed of what products are available to them and how, despite their low FICO score, they can obtain a loan and take advantage of what is still a very favorable mortgage market.
If only there was a mortgage industry professional that had access to multiple lenders, the knowledge base that allows for educating their customers about the different products that are available and the skill set to close their loans quickly… oh wait, that’s exactly what a mortgage broker is (insert sunglasses emoji). All bad joking aside, it’s more important now than ever to educate your potential borrowers and market yourself accordingly.
P.S. I called it. I may have had the score wrong for the game, but Alabama did win the National Championship in a tight game… by 3 points. Yikes, it’s been a tough year for football fans in Georgia...
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.