Homeowners going through foreclosure today may have to wait five years before they are able to get financing for a home again.
That’s according to new federal guidelines from the Federal National Mortgage Association and the Federal Home Mortgage Corp., otherwise known as Fannie Mae and Freddie Mac.
And after those five years, a borrower would have to have a Fair Isaac Corp. (FICO) credit score of 680 and put 10 percent down, said Leslie Swart, managing partner and senior loan officer at Blue Skye Lending in Lakewood Ranch.
A FICO score ranges from 300 to 850 points and factors in things like length of credit history, how timely a person is in paying his or her bills and how much an individual has in debt versus available credit, according to Bankrate.com. About 27 percent of the nation falls into the 750-799 scoring range, according to FICO. The smallest category 2 percent — has scores of 499 or less.
“Fannie Mae and Freddie Mac, they’re actually tightening up those restrictions that much more,” Swart said. “The pendulum has swung to the other extreme.”
The move has come about as a result of soaring foreclosures in the nation, mostly linked to subprime mortgages that have left the financial sector in disarray.
Banks and lenders, many of which have written down billions of dollars in bad loans, are less willing to take risk in the subprime aftermath. Fannie Mae and Freddie Mac are the largest purchases of loans sold by banks and lenders on the secondary market.
Traditional mortgage companies also are looking at credit qualifications with more scrutiny, Swart said.
“What’s interesting is, it used to be we could say anything (credit score) over 700 or 720, you’re golden,” Swart said. “But some lenders are pricing their (annual percentage) rates differently at higher FICO levels. You can still get financing in the high 600s, but your rates are better if you’re 720 or plus.”
Resources for
