Two major changes in the mortgage market go into effect this month, and both could help millions more borrowers qualify for a home loan.
First, the nation’s three major credit rating agencies Equifax, TransUnion and Experian will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Specifically, the data must include the person’s name, address, and either date of birth or Social Security number. A sizeable number of liens and judgments do not include this information and have subsequently caused some misrepresentations and mistakes. Of about 220 million Americans with a credit profile, about 7 percent have liens or civil judgments against them. With these hits to their credit removed, their scores could go up by as much as 20 points, according to a study by credit rating firm Fair Isaac Corp. (FICO).
“It’s a significant impact for still a very large number of people,” said Thomas Brown, senior vice president of financial services at LexisNexis, who is concerned that the move will add significant risk to the mortgage system. If you look at someone that has a tax lien or a civil judgment, they can be anywhere from two to more than five times more risky just because of the presence of that information,” he said. “That’s very, very significant.”
Secondly, In addition to the FICO changes, mortgage giants Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan. The two are raising their debt-to-income ratio limit to 50 percent of pretax income from 45 percent. That is designed to help those with high levels of student debt.
“In this case, we’re changing the underwriting criteria, and we think the additional increment of risk for making that change is very small,” said Doug Duncan, Fannie Mae’s chief economist. “Given how pristine credit has been post-crisis, we don’t feel that is an unreasonable risk to take.”
Have you been denied credit in the recent past when you have tried to get Pre-Qualified for a home loan because your debt-to-income level was too high or your FICO score was too low due to errant tax liens or civil judgments?
Well…that might not be the case anymore!
So BEAT OUT YOUR COMPETITION by contacting Global Unity Mortgage today at (860)872-9479 or email us at email@example.com
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