Don't Go Shopping for a New Home Before You Know Exactly How Much You Can Spend! 

What is Credit Scoring? 

Credit scoring is a system creditors use to determine whether to extend credit to potential borrowers. 

Credit scoring takes into consideration a variety of information obtained from credit applications and credit reports, including bill-paying history, outstanding debt, age of accounts, and other information. Using a statistical program, creditors compare the compiled information to the credit performance of consumers with similar profiles. 

A credit scoring system awards points for different factors, ans the total number of points, or credit score, is useful in predicitng how likely it is that a consumer will repay a loan and make on-time payments. 

Using a credit score is one way for lenders to be more accurate, consistent, and objective system based on real data and statistics, it is considered more reliable than subjective or judgemnental methods or criteria that has not been sytematically tested. The Equal Credit Opportunity Act does not allow credit scoring systems to take into account certain characteristics, including race, gender, marital status, religious affiliation, or national origin.  

Two large investors in mortgage loans, Fannie Mae and Freddie Mac, say credit scores are proven to be good predictors as to whether a borrower will repay a loan. 

Lenders typically evaluate a loan application based on a borrower's ability and willingness to repay a loan. A borrower's ability to repay is based on information like current income and stability of past earnings. Willingness to repay a loan is evidence by past credit history - in other words, someone who has made payments on time in the past will most likely do so in the future. 

For most lenders, a credit score is only one of the many factors in the evaluation process. Lenders do not generally deny a loan because of a low credit score alone - other factors can make up for a negative credit score and under-writing decisions are rarely made based on a credit score alone.  

What is a FICO Score? 

A FICO Score is a type of credit score developed by Fair, Isaac & Company using credit bureau information. 

FICO scores range from about 350 to 900, with higher scores indicating lower prbablilty of a default on a loan. 

Although, the FICO Score may be the most well-known, there are other credit scoring companies, and the national credit bureaus may construct proprietary credit scores as well. 

Lenders use the credit score as a tool to predict the risk of a consumer defaulting on a loan. Until recently, only lenders and others who grant credit could gain access to these scores; now, however, consumers can see their own FICO score and learn about how to improve their credit score. FICO scores (and other credit scores), however are not part of a consumer's credit report. 

The higher a borrower's FICO scores, the less risk the borrower is to the lender. For this reason consumer's with higher FICO scores can sometimes qualify for larger loans or more favorable interest rates. 

The higher a borrower's FICO score, the less risk the borrower is to the lender. For this reason, consumers with higher FICO scores can sometimes qualify for larger loan or more favorable interest rates. 

Credit scores and loan pricing. 

Many lenders use credit scores as one of the factors in determining the price of a loan. The price of a loan is the interest rate and the points charged by the lender, which can both fluctuate lower or higher depending on different factors. 

Credit scores may help determine the price of a loan because a borrower who has demonstrated ability and willingness to repay a loan is a lower credit risk. Borrowers with lower credit scores may still get a loan, but they may pay a higher price beacause of the lender assumes a higher risk of default or loss on the loan. 

Other factors also help determine the price of a loan, including property type, property value, teh type of loan, including proerty type, property value, the type of loan, the lender's actual costs in making the loan, and borrower's equity in the property. For example, a borrower's equity in a property generally means a borrower has greater incentive to make the payments and make them on time. 

You might have an idea of the loan payment and mortgage you can afford. But will the bank feel otherwise? It's always best to pre-qualify for a mortgage so you know exactly how much a financial institution would be willing to lend you. 

In the pre-qualification process, you will find out: 

- Exactly how much home or land you can afford. 

- How much cash you will need for the down payment. 

- The minimum down payment, and advantages of higher down payments. 

- What the bank feels you can afford for a monthly payment. 

We help buyers pre-qualify for mortgages every day. Simply fill out the form below to get started. 

Remember: we will respect your privacy! We know this is your personal information, and we will not distribute it to anyone, other than to our preferred mortgage broker. This service is also provided free of charge, without any obligation on your part. It is part of our job as top Evergreen, Conifer and Golden REALTORSŪ to offer services such as these. 

Once you fill out the form, we will quickly process your information and get right back to you! 

We can help you pre-qualify for your mortgage. It's our job! This is free and without obligation...