You’d have to be living on another planet if you haven’t heard reports of subprime mortgages and their effect on the real estate industry.
If you’re planning to buy a home, it’s apparent that loan qualification these days is more challenging. Sellers also feel the effect from fewer qualified buyers who can make a confident, full-price offer.
In preparing a loan application, the most critical factor is usually your credit score, also known as a FICO score, short for Fair Isaac Corporation.
You may be aware that your score can range from 300 to 850 points, and that your score affects your terms and interest rate.
However, there are some details you may find interesting.
You don’t have simply one score, you have three — one from each credit reporting bureau (Equifax, Experian and Trans Union), and each score may differ by as many as 100 points.
Your score is formulated from percentages of five different factors: your payment history (35 percent), your debt (30 percent), length of your credit history (15 percent), your credit types (10 percent), and any newly issued credit (10 percent).
In order to qualify for a prime loan, you’ll need a credit score of at least 620, but you’ll get the best terms and interest rate if your score is above 720.
Your best bet is to check your scores and reported history well in advance of a planned purchase.
The Placer County Association of Realtors is the professional trade association representing approximately 3,300 Realtors, affiliates, and other related industry representatives in Placer County. Call them at (916) 624-8271 or visit their Web site at www.pcaor.com.