The Columbia SC mortgage market probably contains a number of borrowers and prospective borrowers who would be considered affluent. As such, one would assume people who have lots of money, large assets and high net worth would almost automatically qualify them for a jumbo mortgage. If you assumed that, you'd be wrong at least some of the time. Some affluent borrowers still face considerable challenges when it comes to their credit scores. Let's look at how low credit scores can affect even the rich in meeting the qualifications for a mortgage.
Columbia SC Mortgage Market – Credit Affects Us All
The well-known credit reporting agency, Experian, recently released a survey showing that 40% of respondents who earn $100,000 or more still worry their credit score will adversely affect their ability to buy a home this year. In addition, 29% of those surveyed reported they were in the process of improving their credit scores to qualify for better terms on a home mortgage loan. The Experian survey was based on data collected back in February from 500 affluent borrowers or would-be borrowers who recently bought a home or were planning to buy within the next year.
While the average American may find it hard to believe that affluent borrowers – or anybody that earns $100,000 or more annually – could ever have credit problems, credit issues can affect anybody.
Columbia SC mortgage market lenders say the minimum credit score is 720 to get the best jumbo rates and loan terms. Jumbo borrowers with credit scores below 680 are among those who begin facing serious qualification challenges. Some lending institutions may choose to qualify a borrower with a slightly lower credit score under two major conditions. First, the borrower must have income and assets that help offset the lower credit score and, second, if the lender is able to keep the jumbo loan in its in-house lending portfolio. Jumbo mortgages are loans in excess of $417,000 in most markets and $625,500 in select high-priced markets – the limits for the government-backed mortgages.
Ironically, wealthy borrowers often don't even realize they have credit challenges. For example, many affluent borrowers assume their credit scores will remain high if they pay off high balances each month. However, credit reporting agencies also judge the credit management practices of borrowers to ensure they are able to handle credit accounts without becoming financially overwhelmed. In addition, despite their wealth some affluent people just don't worry enough about their credit accounts. While it's a great feeling to know you have credit balances that can probably be paid in full anytime, by not paying attention to payment due dates or late fees, any borrower – regardless of their income or net worth – can run into credit problems that may follow them forever.
An Experian credit specialist said, “It doesn’t matter how much money you have, it really is about how you manage your credit. For the best score, people should limit usage to less than 25% of each entire credit line."
Another problem that often affects affluent borrowers is shared credit obligations. A spouse, for example, who has credit issues that remain unresolved – and unconfessed – can be a proverbial curve ball that can threaten approval of a loan application, not only in the Columbia SC mortgage market, but nationwide as well. If unpaid bills create a problem, that problem can normally be solved by paying the bills in full and using a "rapid re-score" service. Mortgage lenders must request the re-score, which typically costs around $25 per account and can take place in 4-5 days.
New credit-reporting rules that go into affect this summer may also benefit affluent borrowers. The government-sponsored Federal National Mortgage Association (Fannie Mae) buys loans from mortgage lenders and sells them as mortgage-backed securities. They have recently added "trended credit-data reports" as part of their automated underwriting system, to be released into the Columbia SC mortgage market June 25.
Existing credit reports only show the outstanding balances of each account. Therefore, on mortgages, car loans or credit cards the credit report shows what's owed and whether the account holder has made payments on time or late. Under the new system, credit reports using trended data will give the lender more information. While the scoring method itself remains unchanged, the lender is provided with additional data such as the scheduled payment and actual payment amounts over time to better enable lenders to rate how borrowers use credit cards. For example, does the borrower pay the balances in full each month or does he make only the minimum payment?
While the new credit reports from providers TransUnion and Equifax will apply to government-backed mortgage loans, jumbo lenders will probably use them, too. Credit experts say this will give affluent borrowers with high net worths to show their ability to pay despite having high account balances.
You can find more articles pertaining to the Columbia SC mortgage market in the Columbia SC Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
We also post tips daily on Facebook and Twitter and would love for you to follow us there as well.
Columbia SC credit scores are a genuine concern among a growing number of young consumers considering entering the home buying market. First-time home buyers that could potentially exchange their rent payments for equity-building house payments are remaining on the sidelines. They are fearful their credit scores may not be good enough to qualify for a mortgage. The scary thing is, they may be absolutely correct.
Columbia SC Credit Scores Worries First-timers
According to a recent survey prepared by the credit-reporting agency, Experian, roughly a third of future first-time home buyers are worried about their credit scores. They are among an ever increasing percentage of young people who are worried their credit scores won’t be high enough to obtain financing to purchase a home. Nearly 45% of respondents say they’ve put off buying a home until they can improve their credit score. Roughly 20% said they were more likely to decide against pursuing a mortgage loan to buy a home for the next five to ten years.
Credit experts agree that mortgage lending is still relatively tight. In addition, since a credit profile is one of the major factors in securing financing, lender’s continue to use it as an indicator of a borrower's financial health. Therefore, say mortgage lending experts, it’s important for young people with lower credit scores to improve their creditworthiness.
Around 75% of survey respondents said they were working on improving their credit scores. Steps cited include reducing outstanding debt, paying installment bills on time and being more vigilant to protect their credit from identity thieves and fraudsters. Despite these measures, only 30% of homebuyers last month were first-time buyers. This represents a substantial reduction in the historical average of first-time buyers.
According to top economists, qualified first-time home buyers should be more prevalent in the mortgage and home buying markets. With rents rising in nearly all real estate markets and with average interest rates remaining affordably low, the first-time home buying market is ripe for young borrowers.
Let’s examine a few reasons why first-time borrowers are so worried about their credit. In addition, let’s look at how creditworthiness – or the lack thereof – impacts other factors in the home buying arena and Columbia SC credit scores.
Young, prospective home buyers – especially first-time purchasers – have heard for years how important credit history is in obtaining a mortgage loan. Many of them have a limited number of credit accounts and have expressed concerns about qualifying for a home loan. Others have credit card debt or auto debt where monthly payments have been late. Naturally, that history will negatively impact their Columbia SC credit scores.
Student loan debt is another big issue facing a large number of young home buying prospects. When they finished college and finally found a job in what has been a difficult employment market in recent years, student loan debt repayment weighed heavy on many. For the vast majority of these young people, student loan debt represents their largest payment obligation. Some fear adding to that debt will prevent them from meeting the lending criteria required to get a home mortgage.
There are, no doubt, genuine credit concerns among young borrowers contemplating buying a home for the first time. However, there are additional reasons Millennials cite for not yet becoming homeowners. Young people are mobile and transient. They are getting married later, which means they are having families later. Real estate experts say they deal with many more young couples than young singles looking for homes. Simply put, younger people are less likely to put down roots at this stage in their lives.
The job market also has a tremendous influence on not only where but how young prospective home buyers decide to live. For those in entry-level positions or working part-time jobs while pursuing graduate degrees or vocational training, the community in which they now live isn't necessarily where they plan to live in the near future. Committing to a long-term mortgage – especially as a first-time buyer – may seem intimidating to them. They instead rationalize they'd be better off deciding where their new job will be and buying a home in a neighborhood or suburb nearby. Then, they will be more likely to afford the mortgage payments along with the other expenses that go with becoming a home owner.
Ironically, the majority of young people worried about their Columbia SC credit scores – as is the case with most Americans – probably have no idea what their actual score is. They've never checked it. Credit experts recommend prospective borrowers check their credit scores regularly to know where they stand. In addition, they should request a copy of their credit report to ensure accuracy and to make sure there aren't items on the report that don't belong to them.
It's a fairly safe bet the majority of young, first-time home buying prospects haven't checked their credit. So the truth is, they don't know if their credit is good, fair or bad.
Lastly, education and information are two areas in which first-time home buyers are lacking. They are unaware of the various lending programs in the marketplace designed to assist borrowers, especially those purchasing a home for the first time. While lending requirements vary, there are loan products that can help borrowers with lower credit scores or buyers with small down payments. Young people especially need to know this information exists because it can mean the difference between helping them become new home owners or continuing to remain tenants by paying rent.
You can find more articles pertaining to Columbia SC credit scores in the Columbia SC Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
Remember, we also post tips daily on Facebook and Twitter. Check us out there, too.
Credit scores for Columbia SC renters appears to be unaffected by the surging cost of renting according to a report from CoreLogic.
New data from CoreLogic found that the risk of default among Columbia SC renters decreased year-over-year by two points, according to the firm's index value for the first quarter of 2015 — compared to the index value in the first quarter of 2014.
The two-point, year-over-year decrease is a sign of the improving ability to meet lease obligations among prospective Columbia SC renters. And that's a positive sign for investors entering or expanding their market presence. It's also a good sign for the economy.
Columbia SC Renters Housing Outpacing Owned Home Values
Recently, the real estate site Zillow noted that U.S. rents outpaced home values in April for the first time in years. The CoreLogic "SafeRent Renter Applicant Risk (RAR) Index" indicates the credit quality of renter applicants.
Using a mean value of 100 during the base year of 2004, an index value below 100 indicates a renter applicant pool with a higher average risk of not fulfilling lease obligations.
Although credit scores for Columbia SC renters seems to be rising, albeit ever-so slowly, the Federal Reserve of New York released updated household debt data, showing that total consumer debt has now reached $11.85 trillion, an increase of $201 billion from the days of the financial crunch. You know, the one where we were all supposed to have learned our lesson about accumulating too much debt?
Mortgage debt did go down, but it was largely the result of banks writing off bad debt, rather than consumers paying down old balances. And by historic standards, total consumer debt remains high. As a percentage of disposable income, it remains above 100 percent. Before 2002, household debt had never been above 100 percent.
The biggest debt growth came from: auto loans, up $93 billion, student loans, up $78 billion, and credit cards, up $25 billion. The increase across all classes of debt should concern us. And the mythical deleveraging is now over, as Americans borrow to finance homes, cars, schools, and trips to restaurants.
With all that rising debt across so many platforms like cars, student loans and credit cards, it's somewhat amazing that credit scores for Columbia SC renters seems to be holding steady or going up slightly.
Do you know what makes up your credit score?
Have questions or comments about this video? We’d love to hear from you. Just click the comment link below. Your email address will NEVER be shared on this site to protect your privacy.
Once upon a time, it used to be that a person with a credit score of 640 could refinance their mortgage and pretty much be assured of getting the best rate on that mortgage. Unfortunately, those days are long gone.
The mortgage credit crisis of 2007 and 2008 resulted in nearly every mortgage loan source redefining “good” credit to mean a credit score of at least 680 and usually 700 or higher. Up until 2010, those credit scores were considered excellent but they have become the minimums just to qualify for many programs.
The one exception to these new rules is the FHA mortgage refinance program, which still defines good credit as any credit score above 640. In addition, borrowers with credit scores below 640 may still qualify for an FHA refinance mortgage loan if their loan is approved through the automated underwriting system.
The FHA loan program can help borrowers with lower credit scores, but that program does come with mortgage insurance which does add to your monthly payments.
If you have less than 20% equity in your home when you refinance, then it definitely makes sense to use the FHA program to refinance if your credit score is below 700. Private mortgage insurance costs have increased dramatically for borrowers with credit scores below 700. In many cases it is not even available (e.g. for three and four unit properties). Also, private mortgage insurance qualifying requirements are so high right now that even the most qualified borrowers are having trouble obtaining private mortgage insurance.
One option if your credit score is between 640 and 680 would be to work with a credit agency to find out why your score is low and take steps to get your credit score to a level above 680. The good news is that this process used to take months but now only takes weeks. One word of caution, however: while there are many legitimate credit repair agencies there are also a number of less-than-scrupulous companies.
For now, and the foreseeable future, 680 is the minimum credit score needed to refinance with Fannie Mae or Freddie Mac without having to get hit with a higher interest rate, and the FHA program is probably your best bet if your score is below 640 – especially if you are borrowing more than 80% of the value of your home.