I have been asked this four times today – by people who should know the answer, or so I thought.
And, in the past two weeks, I would bet I have been asked the same question, “I thought only people with at least a 720 Credit Score could get a loan”?, by some 18-20 people.
Hence this blog post. The simple answer to the credit score you need to get a loan: 580. That’s right, 580.
And 580 is not a very good credit score. But with that score, today, I can get you a 6.0% 30 year fixed rate loan. (Okay, APR is something like 6.217%, for those who know when I quote a rate, by law, I have to give the APR. That’s a great subject for a future blog post.)
And do you know how much down payment you would need to get a 6.0%, 30 year fixed rate mortgage? As little as NOTHING DOWN! Yes, today. After the Congress did not pass the Bail-out bill, today. Really?
Yes. Really.
So, all this talk about loan criteria tightening, what is that? It is all the abuses – and some good things that made perfect sense – being tightened. Example: A bit over a year ago, a cashier at Macy’s who was paid a W-2 income of $35K per year could apply for a home loan that would require an $85K/year income to qualify for. That cashier, two years ago, could have told the lender what her income is (say, $85K/year), but asked the lender NOT to verify that income in any way. She could also ask for 100% financing. And she would get it.
That is a real loan scenario that came my way – and I turned that prospective borrower away, counseling her that she could not ‘really’ afford the loan. She went down the road, and closed that loan with a competitor of mine. I do not know if she is still in the home; but I can guess.
Two things there: 1. That is the type of loan that is no longer available, anywhere. and, 2. Yes, I, too, originated some Subprime loans. So, I suppose that makes me part of the problem. I just drew the line where common sense said there was no possible way that one could afford the loan. Does that make me part of the problem, or part of the solution? Okay, I am neither, but it feeds my ego to consider such a thing.
Bottom line: if a borrower can, with basic documentation, prove that they can afford to pay back a loan, the money is there, and I can make a home loan for that person, if they desire a home loan. The bar to being approved has not been raised beyond what the normal American can afford. The bar has simply been recognized as existent.
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