Big Banks Hold Good Interest Rates Hostage. I've been in mortgage lending for almost 14 years and I have to speak out about â€credit score gougingâ€. "Credit Score Gouging" is an excuse to take your money and add it to the profit margin of banks. Nearly every homeowner in the United Sates of America is going to have a "Conventional Mortgage" or a "F.H.A. Mortgage". This topic affects almost everyone. Here's a little mortgage background. F.H.A. loans are supposed to be graded and approved according to their F.H.A. criteria: debt ratios, down payment, employment, credit history, etc. NOT a credit score. There is NO MINIMUM CREDIT SCORE required by F.H.A. Here’s how the system works: F.H.A. guarantees banks and lending institutions against the default of a mortgage loan. Banks lend the money and F.H.A is like an insurance policy to the lenders. Specifically, lenders (e.g. banks) that lend money to a borrower under F.H.A. guidelines have a guarantee from the government that if they lend money to a borrower according to F.H.A guidelines and the borrower goes in to default, F.H.A will buy back the loan from the lender. Here’s the question; If the loans are insured and do NOT require a credit score, then why are banks raising interest rates because credit scores are too low and denying loans based upon credit score? The following are the most recent â€Gouging†changes with regard to credit score; 1. Most lenders won't even take a loan that is below a 580 credit score and require that you have a 620 or higher credit score. 2. Some lenders will approve your mortgage with a lower score, if you take a higher interest rate. (I guess raising a borrower's interest rate and payment makes it easier for them to make their mortgage payment). What? Isn't this price gouging? Let me put it another way, you can have good credit, long stable job history, down payment, income, and you will still pay a higher interest rate and larger monthly payment if you have a credit score below 620. People, there's NO reason for this to happen. Banks have just found a reason to make more interest/profit from you. That's what they do (make interest and money). How in the world does this go unnoticed? Wait, there's more and worse. Conforming loans (non F.H.A mortgages/traditional mortgages) are a lot worse. Conforming loans require you to have a 720 or above credit score. That's a high credit score in my opinion. If your credit score is less than 720 your interest rate could be one percent higher than someone with a 720 or above credit score. Why? There are new tiered adjustments to premiums that banks, lenders and brokers are paid that gets passed along to the borrowers in a form of a higher interest rate or possibly thousands of dollars in extra closing costs. Explanation: When the premium gets reduced as a result of a lower credit score, the bank or broker could be working with a cost out of their pocket to get you a 720 credit score interest rate. The bank or broker then has to raise your mortgage rate to avoid having to pay to get you a mortgage. Raising the rate or the customer paying for the credit score adjustments are the only two options. The options could be paying 1.5% of your loan amount or .375% to your interest rate and maybe more. This could be thousands of dollars you will pay for not having a high enough credit score. Let me recap the above; many are going to pay higher interest rates. Your credit score is NOT a definition of your worthiness for credit. It's a NUMBER. You could have a high credit score and not have a job; does that mean you should get a lower interest rate? NO. Here's what you can do, here's what you should do, here's what George Washington would do†Pass this article to everyone you know, post it on as many blogs as you can, and most of all- cut and paste this article and send it to your congressman. Tell your congressman you don't appreciate banks running this country and it's their job to protect your rights, protect your livelihood and do their job. This is completely "turning the other cheek" for federally insured mortgages backed by the United States of America, to allow banks and private banks to get rich and overcharge their own citizens more money based upon credit score and its not even necessary. Here's the link to contact your congressman: https://forms.house.gov/wyr/welcome.shtml Brought to you by Michael Tirio and www.findamortgage.com Opinions based upon information provided at time of publications. April, 2008 www.findamortgage.com
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