Low Fico Mortgage

[Herminia]

I want to share some inside information on low fico mortgage and how do mortgage officers determine your fico score for a mortgage application.

I’m currently working as a mortgage officer for a large company, and I know people are always confused about this issue, and for good reason – it’s complicated.

First and most important – the Fico formula used by mortgage lenders is especially designed for the home loans industry. It is called ‘Factual’ and it is not available to the general public. Usually your ‘Factual’ Fico score is lower than your ‘Standard’ Fico score, which is the only score you as a customer can see.

So don’t look surprised if the score your lender see’s is lower that what you know you have.

Second – As you may expect in a big loan as a mortgage, your Fico scores from the 3 major credit bureaus will be pulled, as well as the tree credit report themselves. For a Fico score to be considered usable, it has to be based on an accurate and concrete information. If your file is very thin and contains very little information, your score may be considered un-usable, which pretty much means you’re likely to be rejected.

In the past, if you had one or two derogatory accounts on your file – a letter explaining your side may have been enough. Today – your chances of getting approved with even one derogatory item of your file are very slim, regardless of your Fico score.

Third – this is how your 3 Fico scores are combined:

• If all three score are different – they use the middle score.
• If two scores are the same – they use that score regardless of whether the other one is higher or lower

Here are three examples that demonstrate it:

• If your scores are 650/670/660 – your underwriting score is 650
• If your scores are 660/650/650 – your underwriting score is 650
• If your scores are 660/670/660 – your underwriting score is 660

If only two scores are available because an applicant has no score at a certain credit agency, the lower of the two available scores is used.

Forth – for joint loans (as most mortgages are) each score for each applicant is calculated as described above, and then the mortgage lender uses the lower score.

Hope this clears the low fico mortgage underwriting process a bit.

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