Too often, mortgage borrowers are rejected for a home loan on the basis of poor credit. Whether you’re in the market for a purchase-money mortgage, a refinance or even a home equity loan, coming to a lender with a strong credit score–especially in this present environment–will truly increase your chances of success.

Today, one-third of the American population has a credit score below 620. Unfortunately, a credit score of 620 isn’t going to get you anywhere, even with those loan programs which claim your credit score isn’t much of a concern.

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Renowned personal finance expert Lynnette Khalfani-Cox has become the latest contributor to sign on with HSH.com. Lynnette’s first article for HSH will be published on Monday, July 5 (so be on the lookout).

But before we begin to see original work by Lynnette on HSH.com, I wanted to discuss a really interesting topic she addressed on her own website, TheMoneyCoach.net:

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“While there is no question that larger down payments correlate with better loan performance, down payments only tell part of the story”
-Acting FHA Commissioner, Bob Ryan

Insufficient down payments were called out as one of the many culprits behind the recent housing market collapse. Now with the qualified residential mortgage definition open for comment, down payment requirements for home loans are again a hot topic of discussion.

Federal regulators have proposed setting a 20 percent down payment requirement for QRMs. While discussion is certainly underway of whether a 20 percent down payment is needed or overstated, folks in the industry are frankly scared of what a 20-percent requirement could do to an already-fragile housing market.

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The FHA’s new commissioner, Bob Ryan, has been on Capitol Hill recently giving his view regarding the qualified residential mortgage (QRM),  the home loan that is destined to play a big role in the mortgage market looking forward.

Under the Dodd-Frank Wall Street Reform Act, lenders can make QRMs or loans which are not QRMs. This is not a light choice, however. The law passed last summer virtually requires lenders to make QRMs. Why? If as a lender you originate a loan which is not a QRM, you must keep a reserve equal to 5 percent of the loan amount.

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If you’re looking at today’s mortgage rates you know that loans never really come with one price. Instead, there are different prices depending on how you structure your loan and how you qualify.

One factor that will influence your mortgage rate is your credit score. The higher your credit score, the greater the chance you’ll qualify for a lower rate. For example, on a scale between 300 and 850, someone with a score of 700 might qualify for a 5 percent mortgage rate while someone with a score of 630 might pay 6.25 percent for the same loan.

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According to the latest National Housing Survey by Fannie Mae, poor credit is the number one stumbling block keeping potential borrowers from owning a home. Recent economic hardships have caused millions of Americans to fall behind on their bills and their mortgage payments. The foreclosure crisis has caused lenders nationwide to reevaluate their lending standards, increasing qualifications, most commonly insisting on higher credit scores than in years before.

That said I want to know, “What’s preventing you from buying a home?”

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Even though we’re still a few months away from the busiest homebuying season of the year, if you’re thinking about buying a home in 2011, it’s time to start preparing a list of do’s and don’ts.

Do: Check Your Credit

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Saturday

“Do you know your home’s history?” Read the rest of this entry »

“Landing a mortgage in 2011 is going to be a bruiser,” writes HSH.com contributing writer Kerry Hannon. “The recession may be over, but mortgage lenders, still feeling the sting of foreclosures, strategic defaults (walk aways) and underwater homeowners are not letting down their guard.”

Revamped scoring models from both FICO and VantageScore are designed to focus more on a borrower’s recent credit history as opposed to their long-term history: Read the rest of this entry »

In case you haven’t seen it, HSH.com has created a section on our website for experienced journalists from around the country to contribute new content to our visitors. We call it our “Contributing Voices” section (located in the middle of our homepage).

Since we’ve already updated the section once, I want to share with you all the articles we’ve added so far:

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