real estate finance - full book (500 pgs)

In some cases a local credit bureau will not report

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Unformatted text preview: orts, Inc. (CRI) of Tustin, California, began offering scoring in October 1993. Each credit repository has a name for their risk score: TRW uses TRW/FICO Score; Equifax uses Beacon, and Transunion uses Emperica. A FICO score rates a consumer's creditworthiness based on data in the individual's credit bureau files. A FICO score considers credit card and installment debt experience in giving the rating. One million borrowers nationwide were studied and it was found that borrowers with FICO scores below 600 had a 1 in 9 chance of falling seriously behind or defaulting on a real estate loan. Borrowers with scores above 800 had only a 1 in 1293 chance of having trouble keeping mortgage loan payments current. Credit bureau scorings evaluate such items as past delinquencies or derogatory payment behavior, current level of indebtedness, length of credit history, type of credit, frequency of application for credit, and credit lines opened. The score reflects the relative risk of serious delinquency, default, foreclosure, or bankruptcy associated with the specific borrower. The higher the FICO score, the lower the risk of default. FNMA found that less than 10% of their current borrowers had FICO scores below 620. The small group that fell below 620 accounted for half of all defaults. What constitutes a problem on a credit report? The following are some good rules of thumb that have been adopted by many lenders: 13-34 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 13: QUALIFYING THE BORROWER 1. No more than one 30– or 60–day late payment for a major installment debt. A major installment debt may be a car payment or any account with a balance in excess of $5,000. No more than two 30– to 60–day late payments on small accounts. This type of account might be a department store charge. No 30– to 60–day late payments showing on a mortgage payment record, unless extreme extenuating circumstances can be proven by the applicant. Many lenders will not approve a mortgage loan for an applicant if the credit report shows any bankruptcies or reposses...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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