By Phoebe Chongchua
For four weeks in a row, mortgage rates are seeing historic lows. The 30-year fixed average interest rate fell from 4.09% to 4.01% in the end of September. This marks the lowest rate since 1951.
Also, economists call the 15-year fixed mortgage drop to 3.28% the lowest ever for that loan. It appears they could go even lower as the Federal Reserve announced that it will push long-term rates down further.
These historically low mortgage rates aren’t necessarily rapidly selling homes. Across the country contract signings have been down. According to USAToday.com, “July's index fell 5.8% in the Northeast, 3.7% in the Midwest and 2.4% in the West. It rose 2.6% in the South.”
The index of sales agreements, tracked by the National Association of Realtors, showed a 1.2% drop down to 88.6 (100 is considered healthy). Still the opportunities for homeownership keep getting better. Some markets are more affordable than ever; prices have been cut in half in some metro areas.
Of course, getting a loan can be part of the barrier to entry in the housing market. These days, to qualify for a loan, a 20% down payment coupled with a high credit score are required by some lenders.
Now, a new credit score service being introduced in November claims it will give lenders a more accurate picture of a borrower's outstanding debts. The company's website has a countdown to the release of CoreScore (credit report from CoreLogic). It touts the system as a way to “see borrowers as you’ve never seen them before.”
Some lenders are being extremely strict because they have difficulty determining previous credit behavior. But, according to CoreLogic, everything will soon change. The CoreScore credit report is a supplement, not a replacement for the current credit reporting systems.
According to the company, “The supplemental information the CoreScore credit report provides will expand your view of borrower credit profiles and deliver important insight into unseen risk and opportunities.”
Among the information that the CoreScore report will deliver to lenders are the following:
1. Properties owned – with and without debt obligations mortgage obligations with companies that may not report to traditional credit reporting agencies
2. Property legal filings, such as notices of default
3. Property tax amounts and payment status
4. Estimated market values on all U.S. properties owned
5. Rental applications and evictions
6. Inquiries and charge-offs from pay-day and online lenders
7. Consumer-specific bankruptcies, liens, judgments and child support obligations
With mortgage restrictions tighter than ever and more supplemental information being offered to lenders about borrowers’ debts and credit behavior, it's vital for borrowers to understand the most important qualifying factors that influence lenders.
The chief concern is the ability to repay the loan followed closely by the willingness to repay.
Borrowers can place themselves in better standing with lenders by doing two key things: paying off as much debt as possible before applying for a mortgage. This is always good as it lowers the debt-to-income ratio. Secondly, lenders examine borrowers’ track record of repayment to determine how they will behave if they are issued a loan. Making sure that credit behavior is monitored and any discrepancies are handled before applying for a loan will help borrowers have a cleaner record and increase the chances of qualifying for a mortgage.
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