The days of asking a loan officer what his interest rate are going to end. Now the question will be what it should have been all along, what is your credit score, how much are you borrowing and at what loan to value. Both Fannie Mae and Freddie Mac have announced new risked based pricing models that will take effect on or about March 1, 2008 for all loans delivered to them. That means that by the end of 2007 if a loan is originated it will in all probability be price based on the risk base models. Here are the links to the Fannie and Freddie announcements:
So what does this mean to the consumer? First of all, if you don’t have a credit score over 680 and you are borrowing more than 70% of the homes value you are going to pay a premium in the interest rate. You may pay as much as .5% in the interest rate or as much as 2 points. Now more than ever it will be a priority to manage your FICO score and maintain at least the 680 mid score. If you remember I previously posted a blog on “Evolution Credit” back on September 20, 2007. Companies such as this will be extremely helpful in helping you improve your credit. However if you just do the simple things, pay your bills on time, avoid collection accounts, don’t max your credit cards, don’t have tax liens or judgments filed against you things will be just fine. If one of those things occurs you will have to work hard to get that FICO back up above the 680 number.
Beware of the credit repair scams artists though. No different from the “Dark Side” lenders who advertise and then take your money to rape you with it there will be people who try to profit from others misfortune. Avoid those pitfalls and don’t rush to a quick fix. Remember what you mother told you, if it seems to good to be true it probably is!
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