Encouraging your borrower when they believe their credit history provides no hope.
As a loan officer, what are you doing to advise your prospective borrower to make their dream a reality? Are you circling the wagons or just quoting the same rates, that other websites or POS systems already provide?
“Ya Gotta Believe!” ~ Tug McGraw
Mortgage credit reporting is the first third-party service interaction your borrower will likely encounter. It can also be the first roadblock. For a moment, let’s place millennial's student loan debt to the side along with any concerns of borrower savings and down payments. Our consumer’s first hurdle is their credit history and FICO® score.
Quoting Tug McGraw just prior to becoming an immediate Philadelphia hero following his 1980 closer performance in the Phillies World Series win, here are some encouraging tools for you and your borrowers:
Three years after a 2015 legal settlement requiring TransUnion, Equifax, and Experian to improve in reducing faulty information on credit reports, new credit reporting standards have settled into place. The process of verifying inaccurate information has improved. Ultimately, consumers have benefited with higher FICO scores and fewer errors threatening their credit health.
Of course, Fannie Mae raised their debt-to-income (DTI) for DU eligible loans to 50% in the middle of 2018. DTI's this high are for excellent credit/stable income borrowers but certainly are additional options. Low down payments (3%) and 620 FICO scores are also minimum thresholds for borrowers in the Home Ready® program, but likely cannot be combined risks without balancing factors. Freddie Mac’s Home Possible® even provides qualification pathways for borrowers with no credit scores.
Returning to credit reporting tools, LO’s should continue leveraging the power of CreditXpert®. With Credit AssureTM, SERVICE 1st clients immediately see the score improvement opportunities on the credit report next to the FICO score for each repository. Using CreditXpert’s WayfinderTM solution, borrowers and LO's uncover the actions the borrower should complete to improve their credit score. With Wayfinder, the LO or Processor determines the FICO score improvement they need and Wayfinder plots the course for the borrower to complete. It’s a tool for borrowers who can immediately take action and qualify, or as a qualification strategy to implement for the months to come. According to CreditXpert, consumers improve their score by an average of 27 points using Wayfinder strategies. Many borrowers scarred by foreclosures/short sales mistakenly believe they’re relegated to the sidelines for at least seven years. It’s simply not true -- and lenders should be educating borrowers that a few derogatory events over the last several years do not irrevocably make you ineligible.
According to a 2019 NAR report, Millennials make up the majority of home buyers at 37%. Interestingly enough, of the older segment of Millennials (those 29-38), only 52% of them were first-time homebuyers and 42% of them had student loan debt with a median balance of $30,000. Their average home purchase price is $278,000. Ellie Mae averages FICO scores for FHA borrowers at 675 and conventional at 751. Overall FICO scores continue to trend down as debt accumulation rises. This population is the majority of your borrower applicants. Their FICO derogatory rates are nearly the same as their older counterparts. They’re in good shape and they need to be encouraged to get off the starting block.
SERVICE 1st has solutions to help you pinpoint your prospective borrowers. We can help you score those most likely to enter the housing market in the months ahead. Did you know 53% of all homebuyers leveraged an open house in their purchase decision according to NAR? That number is even higher for older millennials at 57%. SERVICE 1st allows LO's to instantly and remotely access credit reports, drill down on score improvement strategies and cement their borrower relationship as a trusted advisor. All of us at SERVICE 1st wish our industry colleagues the best in their pursuit to create homeownership opportunities throughout our nation. Please consider us as a resource as you pursue greater opportunities for your organization. For more information on SERVICE 1st, contact 866.606.5952 or visit www.SRV1st.com