Blog – Page 8 of 871 – Fred Gruber - First Rate Financial Group

26

Mar

Mortgage

The Difference Between FICO Score and Credit Score: How It Affects Your Mortgage and Rates

When applying for a mortgage, your creditworthiness plays a significant role in determining your loan approval and interest rates. Two commonly referenced terms are FICO score and credit score, which are often used interchangeably but have distinct differences.

1. What is a Credit Score?

A credit score is a broad term that refers to a numerical representation of a consumer’s credit risk. It is calculated based on various scoring models, including FICO and VantageScore, and is derived from credit report data such as payment history, credit utilization, and length of credit history.

2. What is a FICO Score?

A FICO score is a specific type of credit score developed by the Fair Isaac Corporation. It is the most widely used scoring model by mortgage lenders. FICO scores range from 300 to 850 and are calculated based on five key factors:

Payment history (35%)
Amounts owed (30%)
Length of credit history (15%)
Credit mix (10%)
New credit inquiries (10%)

3. How Do They Affect Your Mortgage?

Interest Rates: A higher FICO score typically qualifies you for lower mortgage interest rates, while a lower score may result in higher rates or loan denial.
Loan Approval: Lenders often have minimum credit score requirements, and FICO scores are a primary factor in the underwriting process.
Loan Terms: Your score can affect down payment requirements and loan programs available to you, such as conventional, FHA, or VA loans.

4. Key Differences

Scope: Credit scores can come from various models, while FICO is a specific scoring model.
Usage: Most mortgage lenders rely heavily on FICO scores for risk assessment.
Impact: Your FICO score has a direct influence on mortgage rates and loan eligibility.

Understanding the distinction between a FICO score and a credit score is essential when preparing for a mortgage application. By improving your FICO score, you can increase your chances of securing better loan terms and lower interest rates.

25

Mar

By Fred Gruber

Mortgage

Navigating Mortgages as a Self-Employed Professional

Securing a mortgage as a self-employed professional can be more challenging than for traditional W-2 employees, but with the right preparation and documentation, it is entirely achievable. Here’s a guide to help you navigate the process:

Document Your Income
Lenders need to assess your financial stability and income consistency. To do this, you’ll need to provide:
- Tax returns for the past two years
- Profit and loss statements
- Bank statements
- Client invoices or contracts
- Consistency is key, so showing steady or increasing income over time strengthens your application.
Manage Your Tax Returns
Many self-employed individuals minimize their taxable income through deductions, but this can reduce the income lenders consider when evaluating your mortgage application. It’s essential to strike a balance between tax savings and showing sufficient income for loan qualification.
Boost Your Credit Score
A strong credit score can offset some of the challenges associated with self-employment. Pay down debt, make timely payments, and avoid opening new lines of credit before applying for a mortgage.
Increase Your Down Payment
A larger down payment can make you a more attractive borrower. It reduces the lender’s risk and can help you secure better interest rates.
Work with a Mortgage Professional
Partnering with a mortgage originator who understands the unique needs of self-employed borrowers can make a significant difference. They can help you find lenders that specialize in working with non-traditional income streams.

While obtaining a mortgage as a self-employed professional may require additional effort, proper documentation, financial management, and the right guidance can help you achieve your homeownership goals.

24

Mar

By Fred Gruber

Financial Reports

What’s Ahead For Mortgage Rates This Week – March 24th, 2025

The previous week had the Federal Reserve making their first rate decision since the Trump administration had taken office. With many uncertainties about the current direction of things, the Federal Reserve had decided there would not be any change necessary to the current rates. Stating that the current inflation and economic conditions have largely been a result of the Trump administration’s policies on tariffs. Chairman Powell has been strongly dovish at this point, stating they would need to “see how things actually work out.” There were a slew of other minor data releases but none were far reaching in their impact on the economy and current direction of things.

FOMC Rate Decision

Faced with pressing concerns over the impact tariffs will have on a slowing economy, the rate-setting Federal Open Market Committee kept its key borrowing rate targeted in a range between 4.25%-4.5%, where it has been since December. Markets had been pricing in virtually zero chance of a move at this week’s two-day policy meeting.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.03% with the current rate at 5.83%
• 30-Yr FRM rates saw an increase of 0.02% with the current rate at 6.67%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.13% for this week. Current rates at 6.15%
• 30-Yr VA rates saw a decrease of -0.13% for this week. Current rates at 6.17%

Jobless Claims

Initial Claims were reported to be 223,000 compared to the expected claims of 225,000. The prior week landed at 221,000.

What’s Ahead

Next week should feature a slew of data releases, most notably the GDP Estimates, S&P Global US Manufacturing / Services PMI estimates, Consumer Confidence, Consumer Sentiment (Univ. of Michigan), and Personal Income & Spending.