I specialize in Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans. I have helped over 900 Kentucky families buy their first home and refinance their current mortgage for a lower rate; Kentucky First time buyers $0 down still available with down payment assistance with KHC. Free Mortgage applications same day approvals. Web site is not endorsed by the FHA, VA, USDA govt agency. Text/call 502-905-3708 kentuckyloan@gmail.com NMLS 57916 NMLS ID 1364
Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Down Payment Assistance Kentucky 2021 Kentucky Hou...
Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Down Payment Assistance Kentucky 2021 Kentucky Hou...: KHC is used for mostly applicants in urban areas of Kentucky that don't have access to USDA or other government agencies to buy...
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
KENTUCKY FHA LOANS VS CONVENTIONAL FINANCING IN KENTUCKY
KENTUCKY FHA LOANS VS CONVENTIONAL FINANCING IN KENTUCKY
Conventional Mortgages.
Banks consider their interests first and protect them by not lending to people they considers poor risks. What constitutes a "poor risk" varies from lender to lender, but the general gist would be anyone whose credit score is 619 or less. Other attributes, such as income level, length of time in current dwelling, and previous loan history all factor into a private lender's decision. As always, the more anyone does notneed the money, the higher the degree of likelihood the bank will lend to that person.
Kentucky FHA Loans
Mortgages that come from the Federal Housing Administration are easier to get than private mortgages, but they will usually have a higher interest rate over the long haul than private mortgages. The FHA has its root during Franklin Roosevelt's administration during the Great Depression. Thousands upon thousands of Americans had either lost their homes in the debacle or were about to lose them. Shorn of their credit rating and nearly penniless, they had no hope of qualifying for loans even if the banks were in a position to lend, which many were not.
The FHA oversaw the lending of money to these desperate people and insured the debts, which contributed to the overall consumer confidence, the lack of which had contributed to the economic devastation of the Great Depression. In the modern era, the practice of the FHA is to oversee the lending money to people who have at least a 500 credit score.
If the person's credit score is from 500-579, then the person must put 10 percent down. If the person's credit score is from 580-619, then the person must put down 5 percent. This is in contrast to standard mortgage loans where the person is allowed, in certain circumstances, to put down as little as 3 percent.
The Mortgage Insurance Difference on for FHA and Conventional Loans in Kentucky
There are three key differences:
Standard mortgages require you to have personal mortgage insurance, or PMI, if the homeowner has less than 20 percent equity in the home.
Standard mortgages require only PMI. FHA loans require borrowers to have two kinds of insurance: the up front mortgage insurance premium, or UFMIP, and the mortgage insurance premium, or MIP.
The cost of PMI is tied to a borrowers credit score whereas FHA insurance is not.
While FHA insurance remains the same cost regardless of a borrower's debt-to-income ratio, it is the more expensive of the two options. Still, the less expensive standard PMI is unavailable to borrowers whose credit is lower than 620. Also, PMI ismore expensive when a borrower's credit is between 620 and 680. A borrower is allowed to cancel PMI before the expiration of the term, too, whereas an FHA borrower is not allowed to do so.
In both standard and FHA loans, the insurance in question protects the lender more than the borrower. Basically, it's there to make sure the lender gets paid in the case of a default. Remember, even though the FHA is a government program, the money comes from private lenders. The FHA insurance makes it more palatable for those lenders to lend to people without good credit because it protects them from loss.
The Final Word
When borrowing money for a mortgage, the borrower should carefully weigh the pros and cons of each kind of mortgage before proceeding. Of course, with solid credit, good income, and a good payment history, it probably wouldn't be necessary to take out an FHA loan, but every case is different, and borrowers should consider all options before "signing on the dotted line."
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Text/call: 502-905-3708
Conventional Mortgages.
Banks consider their interests first and protect them by not lending to people they considers poor risks. What constitutes a "poor risk" varies from lender to lender, but the general gist would be anyone whose credit score is 619 or less. Other attributes, such as income level, length of time in current dwelling, and previous loan history all factor into a private lender's decision. As always, the more anyone does notneed the money, the higher the degree of likelihood the bank will lend to that person.
Kentucky FHA Loans
Mortgages that come from the Federal Housing Administration are easier to get than private mortgages, but they will usually have a higher interest rate over the long haul than private mortgages. The FHA has its root during Franklin Roosevelt's administration during the Great Depression. Thousands upon thousands of Americans had either lost their homes in the debacle or were about to lose them. Shorn of their credit rating and nearly penniless, they had no hope of qualifying for loans even if the banks were in a position to lend, which many were not.
The FHA oversaw the lending of money to these desperate people and insured the debts, which contributed to the overall consumer confidence, the lack of which had contributed to the economic devastation of the Great Depression. In the modern era, the practice of the FHA is to oversee the lending money to people who have at least a 500 credit score.
If the person's credit score is from 500-579, then the person must put 10 percent down. If the person's credit score is from 580-619, then the person must put down 5 percent. This is in contrast to standard mortgage loans where the person is allowed, in certain circumstances, to put down as little as 3 percent.
The Mortgage Insurance Difference on for FHA and Conventional Loans in Kentucky
There are three key differences:
Standard mortgages require you to have personal mortgage insurance, or PMI, if the homeowner has less than 20 percent equity in the home.
Standard mortgages require only PMI. FHA loans require borrowers to have two kinds of insurance: the up front mortgage insurance premium, or UFMIP, and the mortgage insurance premium, or MIP.
The cost of PMI is tied to a borrowers credit score whereas FHA insurance is not.
While FHA insurance remains the same cost regardless of a borrower's debt-to-income ratio, it is the more expensive of the two options. Still, the less expensive standard PMI is unavailable to borrowers whose credit is lower than 620. Also, PMI ismore expensive when a borrower's credit is between 620 and 680. A borrower is allowed to cancel PMI before the expiration of the term, too, whereas an FHA borrower is not allowed to do so.
In both standard and FHA loans, the insurance in question protects the lender more than the borrower. Basically, it's there to make sure the lender gets paid in the case of a default. Remember, even though the FHA is a government program, the money comes from private lenders. The FHA insurance makes it more palatable for those lenders to lend to people without good credit because it protects them from loss.
The Final Word
When borrowing money for a mortgage, the borrower should carefully weigh the pros and cons of each kind of mortgage before proceeding. Of course, with solid credit, good income, and a good payment history, it probably wouldn't be necessary to take out an FHA loan, but every case is different, and borrowers should consider all options before "signing on the dotted line."
Conventional vs. FHA vs. VA loans
| CONVENTIONAL LOANS | FHA LOANS | VA LOANS | |
|---|---|---|---|
| Minimum Credit Score | 620 | 500 with 10% down; 580 with 3.5% down | No minimum score |
| Loan Limits | $548,250 to $822,375 for conforming loans | $356,362 to $822,375 for single-family homes | No loan limits |
| Down payment Minimum | 3% | 3.5% | No down payment required |
| Extra Fees | PMI required with down payment of less than 20% | Upfront mortgage insurance of 1.75% and ongoing fee of 0.45% to 1.05% | Upfront funding fee of 1.4% to 3.6% |
Joel Lobb
Mortgage Loan Officer
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
fax: 502-327-9119
email: kentuckyloan@gmail.com
email: kentuckyloan@gmail.com
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
Kentucky FHA Loans and Conventional Mortgage Loans
What is the difference between Kentucky FHA Loans and Conventional Mortgage Loans?
You know that two of the most popular mortgage options available are FHA and Conventional, but you no doubt have some clients who need help understanding each loan type’s finer details and benefits.
Here’s a quick, simple three-bullet comparison that you can provide for your clients:
Low down payments:
Both options feature low down payment options (eligible borrowers can put down as little as 3.5% for FHA and 3% for Conventional), but it can be easier to qualify for an FHA loan, as lower credits scores are accepted and there are less restrictive debt-to-income ratio requirements.
Residence type:
You can only use an FHA loan on a primary residence; a Conventional mortgage can be used for primary homes, vacation homes, or investment properties.
Mortgage insurance:
Mortgage insurance is required on all FHA loans, regardless of down payment size. You can avoid paying private mortgage insurance on a Conventional loan if you have a 20% down payment. But if you don’t, PMI drops after you reach 22% of your home’s equity.
Joel Lobb
Mortgage Loan Officer
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
fax: 502-327-9119
email: kentuckyloan@gmail.com
email: kentuckyloan@gmail.com
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
Kentucky USDA Rural Housing Mortgage Lender: Kentucky First Time Home Buyer Programs For Home M...
Kentucky USDA Rural Housing Mortgage Lender: Kentucky First Time Home Buyer Programs For Home M...: Kentucky First Time Home Buyer Programs For Home Mortgage Loans: Kentucky USDA Rural Housing Streamline Refinance G... : How does a Kentuck...
Joel Lobb (NMLS#57916)
Senior Loan Officer
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
What is Mortgage Insurance for a Kentucky Mortgage Loan Approval?
What is Mortgage Insurance?
If you can’t pay your mortgage, mortgage insurance protects your lender from financial loss. It doesn’t provide any coverage for your home; it only protects your mortgage lender. If you put less than 20% down on a home purchase, the lender considers your mortgage to have a higher risk. Therefore, mortgage insurance protects their investment if you stop making loan payments.
When Are You Required to Have Mortgage Insurance?
Different mortgage types and lenders have varying mortgage insurance requirements. While some may require mortgage insurance as a monthly payment, others may require an upfront fee or a combination of both.
Conventional Loan Mortgage Insurance Requirements
If you have a conventional loan through a private lender and put less than 20% down, a lender can require you to purchase private mortgage insurance (PMI). While some lenders require the borrower to pay for the mortgage insurance, other lenders offer lender-paid mortgage insurance. In other words, instead of directly paying for the mortgage insurance, the lender increases the interest rate to account for the additional risk of the loan.
There are several ways you can pay for your PMI if it’s a requirement:
Pay the entire amount in full
Make monthly payments
Or combine the two options
Most borrowers choose to make monthly payments.
You’ll continue paying for PMI until your mortgage balance reaches 80% or less of the home’s value and you have made timely payments. At this point, you should request the removal of PMI. Some lenders will automatically remove PMI when your loan balance reaches 78% of the original value of the home.
It’s important to point out that it’s your responsibility to keep track of the loan balance and payments. So when you reach a sufficient amount of equity, it’s up to you to request a cancellation of PMI. If you don’t, you could end up paying more premiums than you need to.
Some conventional lenders don’t require PMI, even if you put less than 20% down. So before applying for a mortgage, ask the lender about the PMI requirements.
FHA Mortgage Insurance Requirements
Suppose you choose a Federal Housing Administration (FHA) loan. In that case, you’re required to have mortgage insurance and pay it as an upfront mortgage insurance premium (UPMIP) and an annual mortgage insurance (MIP) regardless of your down payment amount.
Similarly, if you choose a U.S. Department of Agriculture (USDA) loan, you pay mortgage insurance in the form of a guaranteed fee and an annual upfront fee.
With an FHA loan, there are some circumstances where you can’t cancel your mortgage insurance when you reach 20% equity. MIP will remain in your loan indefinitely if you put less than 10% down. On the other hand, MIP can be removed after 11 years if your down payment is over 10%.
How to Get Mortgage Insurance
Your lender will select your mortgage insurance from a private company if you have a conventional loan. The payment is included in the monthly payment to your lender. Other lenders increase your interest rate to account for the mortgage insurance payment.
Unlike conventional loans, FHA loans require an upfront mortgage insurance payment as part of your closing costs. But like conventional loans, the other portion of your mortgage insurance is added to your monthly payment. Both payments are paid to the FHA.
Mortgage Insurance Cost
Depending on factors like your loan type, credit history and down payment, mortgage insurance costs can vary. But you can expect to pay between $30 and $70 per month for every $100,000 you borrowed, according to Freddie Mac.
With a USDA loan, you can expect your annual mortgage insurance rate to be 0.35% with a 1% upfront payment. FHA loan annual mortgage insurance rates currently vary between 0.8% and 1.05%, with a 1.75% upfront fee.
Suppose you buy a $300,000 home with a 3.5% down payment, for example. This means you must borrow $289,500. If you have a 30-year term with a 2.71% interest rate, you’ll pay an extra $114.54 (0.85%) in MIP with a UFMIP of $5,066.25.
How to Avoid Mortgage Insurance
If possible, you can avoid mortgage insurance since it covers your lender, not you. To avoid paying this additional expense, here are a few options.
Put down 20% or more. If you can put more than 20% down on a conventional loan, you probably avoid paying for PMI.
Take out a piggyback loan. With this type of loan, you can put 10% down and get another loan to cover the other 10% of the down payment.
Apply for a VA loan. If you qualify, you could buy a home with a VA loan, which doesn’t come with mortgage insurance requirements.
Compare lenders. Before you decide on a home, compare loan options and offers from various lenders; some may not require mortgage insurance. Review all costs involved to find the most suitable option for your needs.
If you do end up purchasing a home with mortgage insurance, make sure to keep track of the equity built in your home. This way, once your loan is less than 80% of the home’s value, you can either refinance or request a cancellation of your mortgage insurance if your lender allows.
I can answer your questions and usually get you pre-approved the same day.
Call or Text me at 502-905-3708 with your mortgage questions.
Email Kentuckyloan@gmail.com
Joel Lobb (NMLS#57916)
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
Text/call 502-905-3708
kentuckyloan@gmail.com
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
, NMLS ID# 57916, (www.nmlsconsumeraccess.org). I lend in the following states: Kentucky
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
Kentucky USDA Rural Housing Mortgage Lender: Kentucky USDA Rural Development Loans Program Guid...
Kentucky USDA Rural Housing Mortgage Lender: Kentucky USDA Rural Development Loans Program Guid...: Kentucky USDA Rural Development Loans Program Guidelines Loan Purpose of Kentucky Rural Housing Loans Purchase One-time Close Constr...
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Using Gift Money for a Down Payment in Kentucky Fo...
Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Using Gift Money for a Down Payment in Kentucky Fo...: Can a family member help you come up with the down payment for a mortgage? If so, are there any limits on how much they can provide or ot...
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
About FICO® Scores
About FICO® Scores
What is a credit score?
A credit score is a number that summarizes your credit risk to lenders, or the likelihood that you’ll pay the lender back the amount you borrowed plus interest. The score is based on a snapshot of your credit report(s) at one of the three major credit bureaus—Equifax®, Experian®, and TransUnion®—at a particular point in time, and helps lenders evaluate your credit risk. Your credit score can influence the credit that’s available to you and the terms, such as interest rate, that lenders offer you.
What is a credit bureau?
A credit bureau, also known as a consumer reporting agency, collects and stores individual credit information and provides it to creditors so they can make decisions on granting loans and other credit activities. Typical clients include banks, mortgage lenders, and credit card issuers. The three largest credit bureaus in the U.S. are Equifax®, Experian®, and TransUnion®.
What are FICO® Scores?
FICO® Scores are the most widely used credit scores and are used in over 90% of U.S. lending decisions. Your FICO® Scores (you have more than one) are based on the data generated from your credit reports at the three major credit bureaus, Experian®, TransUnion® and Equifax®. Each of your FICO® Scores is a three-digit number summarizing your credit risk, that predicts how likely you are to pay back your credit obligations as agreed.
What it the highest credit score?
Most credit scoring models follow a credit score range of 300 to 850 with that 850 being the highest score you can have. However, there can be other ranges for different models, some of which are customized for a particular industry (credit card, auto lending, or insurance for example). While the majority follow the 300 to 850 range, there are some scores (e.g., FICO® Bankcard Score) that range from 250 to 900 and others that may use other score ranges. For more information on the different scoring models, view Understanding the difference between credit scores.
Why do FICO® Scores fluctuate?
There are many reasons why your score may change. The information on your credit report changes each time lenders report new activity to the credit bureau. So, as the information in your credit report at that bureau changes, your FICO® Scores may also change. Keep in mind that certain events such as late payments or bankruptcy can lower your FICO® Scores quickly.
FICO® Scores consider five main categories of information in your credit report.
- Your payment history
- The amount of money you currently owe
- The length of your credit history
- New credit accounts
- Types of credit in use
What are the minimum requirements to produce a FICO® Score?
In order for a FICO® Score to be calculated, a credit report must contain these minimum requirements:
- At least one account that has been open for six months or more.
- At least one account that has been reported to the credit reporting agency within the past six months.
- No indication of deceased on the credit report (Please note: if you share an account with another person and the other account holder is reported deceased, it is important to check your credit report to make sure you are not impacted).
Does a FICO® Score alone determine whether I get credit?
No. Most lenders use a number of factors to make credit decisions, including a FICO® Score. Lenders may look at information such as the amount of debt you are able to handle reasonably given your income, your employment history, and your credit history. Based on their review of this information, as well as their specific underwriting policies, lenders may extend credit to you even with a low FICO® Score, or decline your request for credit even with a high FICO® Score.
How long will negative information remain on my credit reports?
It depends on the type of negative information. Here’s the basic breakdown of how long different types of negative information will remain on your credit reports:
- Late payments: 7 years from the original delinquency date.
- Chapter 7 bankruptcies: 10 years from the filing date.
- Chapter 13 bankruptcies: 7 years from the filing date.
- Collection accounts: 7 years from the original delinquency date of the account
- Public Record: Generally 7 years
Keep in Mind: For all of these negative items, the older they are the less impact they will have on your FICO® Scores. For example, a collection that is 5 years old will hurt much less than a collection that is 5 months old.
Are FICO® Scores unfair to minorities?
No. FICO® Scores do not consider your gender, race, nationality or marital status. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit. Independent research has shown that FICO® Scores are not unfair to minorities or people with little credit history. FICO® Scores have proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given FICO® Score, non-minority and minority applicants are equally likely to pay as agreed.
How are FICO® Scores calculated for married couples?
Married couples don’t share joint FICO® Scores; each person has their own individual credit report, which is used to calculate FICO® Scores, and isn’t impacted by their spouse’s credit history. However, married couples should be mindful of the potential impact of opening joint credit accounts. For example, if you get a new credit card in both spouses’ names, and there is a late payment on that account, the late payment will impact both individuals’ FICO® Scores.
How can I access my credit report?
By federal law, you are entitled to one free credit report every 12 months from each credit reporting company, TransUnion®, Equifax®, and Experian®. Find them at annualcreditreport.com. Take advantage of this service annually to ensure the information on your credit report is current and accurate.
Impacts to FICO® Scores
Will closing a credit card account impact my FICO® Score?
It is possible that closing a credit account may have a negative impact depending on a few factors. FICO® Scores may consider your “credit utilization rate”, which looks at your total used credit in relation to your total available credit. Essentially, it measures how much of your available credit you are actually using. The more of your credit that you use, the higher your utilization rate and high credit utilization rates may negatively impact your FICO® Score. Before you close any credit card account, Wells Fargo recommends that you should first consider whether you really need to close the account or if your real intention is just to stop using that credit card. If you really just want to stop using that card, it may make sense if you stop using the card and put it somewhere for safe keeping in case of an emergency. It’s also important to note that length of your credit history accounts for 15% of your FICO® Score calculation. Therefore, having credit card accounts that are open and in good standing for a long time may affect your FICO® Score.
How does refinancing impact my FICO® Score?
Refinancing and loan modifications may affect your FICO® Scores in a few areas. How much these affect the score depends on whether it’s reported to the consumer reporting agencies as the same loan with changes or as an entirely new loan. There are many reasons why a score may change. FICO® Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). If a refinanced loan or modified loan is reported as the same loan with changes, two pieces of information associated with the loan modification may affect your score: the new credit inquiry and changes to the amounts owed. If a refinanced loan or modified loan is reported as a “new” loan, your score could still be affected by the new credit inquiry and an increase in amounts owed,— along with the additional impact of a new “open date” which may affect the credit history category. In the end, a new or recent open date typically indicates that it is a new credit obligation and, as a result, may impact the score more than if the terms of the existing loan are simply changed.
How do FICO® Scores consider loan shopping?
In general, if you are “loan shopping” - meaning that you are applying for the same type of loan with similar amounts with multiple lenders in a short period of time - your FICO® Score will consider your “shopping” as a single credit inquiry on your score if the shopping occurs within a short time period (30 to 45 day) depending on which FICO® Score version is used by your lenders.
What are the different categories of late payments and do they impact FICO® Scores?
A history of payments is the largest factor in FICO® Scores. FICO® Scores consider late payments in these general areas; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur. So this means that a recent late payment could be more damaging to a FICO® Score than a number of late payments that happened a long time ago. Late payments are listed on credit reports by how late the payments are. Typically, creditors report late payments in one of these categories: 30-days late, 60-days late, 90-days late, 120-days late, 150-days late, or charge off (written off as a loss because of severe delinquency). Of course a 90-day late is worse than a 30-day late, but the important thing to understand is that people who continually pay their bills on time tend to appear less risky to lenders. However, for people who continue not to pay debt, and their creditor either charges it off or sends it to a collection agency, it is considered a significant event with regard to a score and will likely have a severe negative impact.
How does a bankruptcy impact my FICO® Score?
A bankruptcy is considered a very negative event by FICO® Scores. As long as the bankruptcy is listed on your credit report, it will be factored into your scores. How much of an impact it will have on your score will depend on your entire credit profile. As the bankruptcy item ages, its impact on a FICO® Score gradually decreases. Typically, here is how long you can expect bankruptcies to remain on your credit reports (from the date filed):
- Chapter 11 and 7 bankruptcies up to 10 years.
- Completed Chapter 13 bankruptcies up to 7 years.
These dates and time periods refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit reports after 7 years.
How do public records and judgments impact FICO® Scores?
Public records are legal documents created and maintained by Federal and local governments, which are usually accessible to the public. Some public records, such as divorces, are not considered by FICO® Scores, but adverse public records, which include bankruptcies, are considered by FICO® Scores. FICO® Scores may be affected by the mere presence of an adverse public record, whether paid or not. Adverse public records will have less effect on a FICO® Score as time passes, but they can remain in your credit reports for up to ten years based on what type of public record it is.
What are inquiries and how do they impact FICO® Scores?
Inquiries may or may not affect FICO® Scores. Credit inquiries are classified as either “hard inquiries” or “soft inquiries”—only hard inquiries have an effect on FICO® Scores.
Soft inquiries are all credit inquiries where your credit is NOT being reviewed by a prospective lender. FICO® Scores do not take into account any involuntary (soft) inquiries made by businesses with which you did not apply for credit, inquiries from employers, or your own requests to see your credit report. Soft inquiries also include inquiries from businesses checking your credit to offer you goods or services (such as promotional offers by credit card companies) and credit checks from businesses with which you already have a credit account. If you are receiving FICO® Scores for free from a business with which you already have a credit account, there is no additional inquiry made on your credit report. FICO® Scores take into account only voluntary (hard) inquiries that result from your application for credit. Hard inquiries include credit checks when you’ve applied for an auto loan, mortgage, credit card or other types of loans. Each of these types of credit checks count as a single inquiry. Inquiries may have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk.
How does applying for new credit impact my FICO® Score?
Applying for new credit only accounts for about 10% of a FICO® Score. Exactly how much applying for new credit affects your score depends on your overall credit profile and what else is already in your credit reports. For example, applying for new credit may have a greater impact on your FICO® Scores if you only have a few accounts or a short credit history. That said, there are definitely a few things to be aware of depending on the type of credit you are applying for. When you apply for credit, a credit check or “inquiry” can be requested to check your credit standing.
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
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