Hello, FICO!


By Kathy Henne

Contributing columnist

You hear it everywhere: FHA loans, Conventional loans, VA loans, FICO scores, default risks, rising & falling interest rates. Sounds confusing, doesn’t it? Lenders are generating lots of business, so it’s an excellent time to purchase a home. It’s also time to educate yourself about the economics behind securing a home loan.

The rate you are offered on a mortgage is largely based on your FICO score. What is FICO? It simply stands for Fair Issac & Company, who developed our modern credit scoring models. The highest possible “score” is 850, and you’ll need a rating of 620 or above to be considered for the best interest rates.

Higher income does not necessarily generate a higher score. Your payment history does have a significant impact, however. If you have a higher credit score, you’ll find it much easier to get a loan.

Your lender may offer you a loan with a pre-payment penalty. This means you would pay a certain amount if you paid your loan off early.

Your lender may ask you if you’d like to buy down the interest rate by buying “points.” A point is 1% of the amount borrowed. On a $90,000 loan a point would be $900. You may decide to purchase points to get a better interest rate.

Be cautious out there – with so many loans available, you’ll find some are a good fit and some are downright unwise. Your experienced, local Realtor and your trusted loan officer will work together to determine the best avenue for you to follow, leading right up to the front door of your new home!

Contact the Kathy Henne Team RE/MAX by calling 937-778-3961.

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