If you’re planning to buy a home in the near future, you should know your FICO credit score. In fact, your credit score is one of the three most important factors considered by mortgage lenders (along with your debt and income levels). If your score is high, you’ll have a much better chance of getting approved for a loan. You’ll also qualify for a better interest rate, which could save you thousands of dollars over the life of the loan.

It’s important to check your FICO score early on in the home-buying process, because it takes time to improve a low score. While you’re entitled to a free credit report per year, you’ll have to pay a small fee for the credit score. They are two different things. You can purchase your score from MyFICO.com — this is the company that actually designed the FICO scoring model.

But what if you check your score and find out that it’s low? You could qualify for certain types of loans with a score in 600 range, but you’ll be much better off in the mid- to upper-700 range. The question now becomes: How do I Improve my score? And that brings us to the purpose of this article.

5 Good Sources of Credit Information

Here are five websites worth visiting, if you want to learn more about your credit reports and scores:

1. www.myfico.com — We touched on this website earlier. This site is owned by the Fair Isaac Corporation, the company that created the credit-scoring model used by most lenders. They have plenty of educational articles, as well as a forum where you can post questions. It’s well worth a visit.
2. www.homebuyinginstitute.com/credit.php — On this page, you’ll find a collection of more than 100 articles relating to consumer credit. This collection was compiled over a two-year period, as readers sent in their questions. If you have a question about credit reports and scores, you’ll find the answer on this site.
3. www.annualcreditreport.com — This website is jointly owned by the three credit-reporting companies (TransUnion, Equifax and Experian). This is where you should go to request your free reports. This is the only site that is regulated by the Federal Trade Commission.
4. www.ftc.gov/freereports — Why do so many people offer “free” credit reports, and then try to charge you for stuff? It’s a marketing strategy referred to as bundling, and you can learn the truth about it on this website.
5. www.bankrate.com — This site is a treasure trove of helpful advice. In addition to credit tips, it explains the mortgage process in great detail. Start with a keyword search, or click on the “news and advice” link.
   Research is the first step to home-buying success. The five resources listed above will help you get started on the right foot.

© 2009, Cornett Communications.

About the Author: Brandon Cornett is a consumer advocate and publisher of the Home Buying Institute. You may visit the author’s website at www.HomeBuyingInstitute.com to learn more about this topic.

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The FHA allowed families to purchase homes with very little money and at market interest rates, even if they had a tainted credit history. The FHA was a godsend to what was left of the banking industry in 1934. Since every FHA loan was insured by Up-Front Mortgage Insurance Premiums (UFMIP) and MIP (mortgage insurance premiums) the banks had very little risk. Homeownership was now available to the masses, not just the privileged few. 

In its 74 year history, there have been many changes to the FHA, but the most sweeping change is about to take place in about a year. The FHA has always offered the same interest rate to all its borrowers, regardless of their down payment or credit rating. It did not matter whether you put down 3% or 20%, or your credit scores was 550 or 850, your interest rate was the same. That will not be the case in the very near future.

The FHA is about to implement ‘Risk Based Lending”, just like conventional banks.  Translated this means the lower your downpayment and the lower your credit score, the higher your interest rate.  This would have been implemented on October 1, 2008 but Congress placed a 1-year moratorium on this radical change to allow for the sale of the millions of foreclosed homes clogging up the banks balance sheets.

What does this mean for people who would need to take advantage of the low down payment/lower interest rates now offered by the FHA in order to buy a home? Very simply, if you wait to buy a home until 2009, may very well have to come up with more cash and suffer through higher interest rates and therefore, higher payments. Many people will be forced out of the market altogether, thereby taking homeownership out of the hands of thousands upon thousands of people.

Mr. & Mrs. Charles Humphreys, The First Home Financed
through the FHA

As a professional, my advice to anyone who thinks they will need to finance their home through FHA is to do it as soon as possible.  Once the FHA is allowed to change their guidelines to “Risk Based” financing, people who once relied on old guidelines to qualify for a low, fixed rate mortgage will be out of luck.

Linda Iwaniw
REALTOR Associate First Time Home Buyer Specialist
Fixer Upper Property Specialist
Foreclosure Prevention Consultant
RE/MAX Home Team
609-417-1084
http://www.sjerseyhomes.com/

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