Credit and Fico Score Update 2022 For Houston First Time Home Buyers
Good afternoon. If you have been turn-down for a mortgage due to a lack of credit, you may want to wait a bit and apply again. New and hopefully improved changes to how lender use credit scores for mortgage underwriting is here. Here are the highlights:
The Federal Housing Finance Agency announces on Monday, October 24th 2022 that lenders are now required to use credit scores for mortgage underwriting from both Fair Isaac Corp., and VantageScore Solutions LLC.
The FHFA, along with Fannie Mae and Freddie Mac began the review back in 2014 of whether to change credit score requirements.
The push for change was necessary since it would allow more people to get approved for mortgages
The change will be a multiyear effort
Older version of the FICO score that was previously required will be replaced with the new FICO score-10
No date yet, on The Federal Housing Finance Agency website as to when the changes will take place.
VintageScore 4.0 incorporate information about borrowers' rent payments, utilities bills and phone bills when added to credit reports, rather than just information about bank loans and other financing.
This information is likely to increase approvals for people with limited credit history
VantageScore, is owned by Equifax Inc., Experian PLC and TransUnion.
VantageScore said it can assign a credit score to about 37 million more consumers than the FICO score.
Roughly 10 million of those consumers could potentially be eligible for a Fannie or Freddie mortgage.
If borrowers don't have two scores when the change goes into effect, lenders can still underwrite the loans manually.
The FHFA also said that it would change the requirement from using the three credit-reporting firms, Equifax, Experian and TransUnion, for Fannie and Freddie mortgages, to using only two.
In a nut shell, instead of using only FICO which has been industry standards since what seems to be the beginning of time, (20 years) the Federal Housing Finance Agency now require lenders to also use VantageScore 4.0.
By doing so, the goal is to get more people qualify for Fannie or Freddie mortgage. In addition, mortgage lenders always pull all three credit scores before eliminating the highest and the lowest scores and using only the middle scores. However, now, only two scores will be required.
This is good news for anyone that was declined a mortgage for lack of having enough credit or because the middle score was not high enough, and for those who felt they would not qualify for a mortgage loan in general. As always, thank you for stopping by. Until next time Diana
Source: WSJ Source: The Federal Housing Finance Agency
Image by Diana for First Home Houston
