FICO Makes Key Changes To Credit Scoring

Fair Issac Corp (FICO) made some recent key changes in how it will evaluate borrowers credit which will help certain borrowers attain better credit scores.

Fair Isaac Corp. FICO +0.15% said Thursday that it will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency.

As of July, about 64.3 million consumers in the U.S. had a medical collection on their credit report, according to data from credit bureau Experian. And of the 106.5 million consumers with a collection on their report, 9.4 million had no balance—and won’t be penalized under the new credit-score system.

More than half of all debt-collection activity on consumers’ credit reports comes from medical bills, according to the Federal Reserve. Such activity results in lower credit scores for consumers, meaning that lenders are more likely to be cautious in extending credit.

The impact of the changes on borrowers is likely to be significant. Accounts that are sent to collections, including credit-card debts and utility bills, can stay on borrowers’ credit reports for as long as seven years, even when their balance drops to zero, and can lower their scores by up to 100 points, said Mr. Ulzheimer.

The lower weight given to unpaid medical debt could increase some affected borrowers’ FICO scores by 25 points, said Mr. Sprauve

As noted in some of the excerpts from the WSJ article, many home loan borrowers today have some sort of medical collections whether paid or unpaid on their credit reports.  The fact that FICO will be giving less weight to this should help many VA, FHA and conventional borrowers earn better credit scores.   Additionally, the fact that FICO will stop penalizing borrowers for collection accounts that have already been paid will be a big plus for home loan applicants.   This is all great news for home loan applicants.

 

VA Loans Are Best Loans Available Today

VA home loans are the very best available home loans anyone can get today.  They are a tremendous benefit for active military and veterans.  Below I list some of the factors that make VA home financing very unique and the best:

  • Zero down 100% financing: There is no other loan type (other than rural property USDA loans) that allow a borrower to finance 100% of the purchase price with no down payment.  This allows veterans and active military members to keep more cash in the bank as a cushion and as reserves.
  • VA 30 year fixed interest rates are the lowest: VA interest rates are lower than conventional home loan rates.  Even if a conventional borrower puts 20% down payment or more, they will not get an interest rate as low as VA loan offer.
  • VA loans only require a one year wait after prior short sale: Yes this is correct.  A veteran or active military member only has to wait one year after a prior short sale and they can apply for a VA home loan.  Conventional home loans even with 20% down now require a four year wait after a prior short sale. FHA home loans require a three year wait.
  • VA loans only require a two year wait after a prior foreclosure:   Again this is a great VA benefit.  Conventional home loans in comparison require a seven year wait after prior foreclosure.  FHA home loans require a three year wait.
  • VA home loans only require a two year wait after a prior Chapter 7 bankruptcy:  In comparison conventional loans require a four year wait after a prior bankruptcy even with 20% down payment.
  • VA loan do not have monthly mortgage insurance even with zero down: Conventional and FHA home loans have very high monthly mortgage insurance with low down payments.
  • VA eligible borrowers can get partial eligibility even if they have had a prior short sale or foreclosure with a prior VA loan.  Or if they own another property with a VA loan: Give us a call or email and we can check your current eligibility.
  • Veterans that receive disability pay are exempt from the funding fee on VA home loans: This is a huge benefit.  Even if a veteran has the minimum 10% disability they will still get the funding fee waived.
  • VA allows for zero down payment on very large jumbo sized home loans: You can get a zero down VA loan for very large amounts in many counties in California.  Here are some examples of California counties and the amounts you can go zero down up to.  Alameda County, Contra Costa County: $1,050,000. Los Angeles County: $687,500, Napa County: $592,250, Orange County: $687,500, Placer County: $474,950, Sacramento County: $474,950, San Diego County: $546,250, Santa Clara: $827,500, Santa Cruz County: $681,250, Sonoma County: $520,950, Ventura County: $598,000.  And with a very small down payment a VA borrower can go above these loan limits.
  • VA home loans allow for a borrower to do a cash-out refinance to 100% of their property value: There is no other loan today that will allow this.
  • VA lending offers an easy streamline refinance program to drop your payment to market rates if rates drop: This program requires no appraisal and no income documentation.   Conventional financing does not offer anything similar to this.
  • A VA borrower can be approved for a VA home loan without having perfect credit: In fact a borrower can apply for a VA home loan with a credit score in the 500’s and still get 100% financing.

So I hope this helps you understand the incredible niches of VA loans and why they are the best home loans available in the U.S. today.  Don’t hesitate to call or email if you have any questions about VA home loans.

Stated Income Loans Available In San Diego

Stated income home loans are now available again in San Diego.  The term stated income refers to a borrower being allowed to “state” their income on a loan application and not have to document their income.  These home loans do not require paystubs or tax returns to document the income that is being stated on the loan application.  Stated income loans got a bad reputation before the housing crash in 2008 because they were abused and offered to low credit borrowers with low down payments.  This time around stated income home loans require higher credit scores, require borrowers to be self-employed and require larger down payments.

The good news is that the return of stated income home loans allows self-employed borrowers with complicated tax returns or uneven income the last few years to be able to buy a home or refinance their homes once again.  Below are some of the features of stated income loans:

  • Income is stated on the loan application but not verified
  • Loan amounts up to $2 million
  • Minimum credit score is 700
  • 30% down payment minimum
  • Cash out refinances available
  • Self-employed borrowers only
  • Primary residence or second homes only
  • One unit single-family or PUD only

So this is a great opportunity to be able to get back into home ownership or refinance your home if you are a self-employed borrower.

Stated Income Loans In San Diego

Stated income home loans have been very hard to come by in the last 7 or 8 years.  But now they are once again available for select borrowers.  Stated income loans got a bad reputation in mid-2000′s as they were being used by borrowers who shouldn’t have been using them, borrowers with low credit scores and low down payments.  But stated income home loans can be an excellent loan for self-employed borrowers with complicated tax returns, but also have high credit scores and large down payments.  The term “stated income” generally means that the lender making the loan is not going to verify a borrower’s income or require any borrower income documentation.

Below are some guidelines for the stated income home loan program we have available:

  • Income is stated by not verified
  • Loan amounts to $2 million
  • 700 minimum credit score
  • Minimum down payment 30%
  • Purchase or refinances available (cash out refinances available too)
  • Max cash out $400,000
  • Self-employed borrowers only (no W-2 salary employees allowed with this program)
  • Available for primary residence or second home

Read through these bullet points and see if you may be able to qualify.  This can also be used for a vacation home.  It is a big advantage to not have to gather all of your tax returns and provide them.  This loan also goes all the way up to $2 million, so you can purchase homes in high cost areas of California.  Don’t hesitate to give us a call or email if you have any questions at all about this stated income home loan program available in San Diego and the rest of California.