Mortgage Blog

Let me start with a scenario first. Borrower A has a credit score of 720. For 7/1ARM loan program, the rate is above 0.375% higher, compared to 760 credit score, the LTV 75%. Normally we will provide a few options to the borrower, option 1 with $5000 lender credit to cover the closing. Option 2 with $2500 credit, option 3 with $0 lender credit. And some borrower will choose the rate directly. Some choose lower rates, some choose higher for more lender credits.

When I talked to this prospects, I would check the credit reports first, try to find out why the credit score is low, can we fix the credit score? How much credit score can we help to improve, and how long does it take to fix it? The different answers might affect borrower's decisions, and as a mortgage consultant, we need to let borrowers understand the options.

And also, I did not do the pre-approval for the loan for this purchase. If I did, I would try to ask the borrowers to improve the credit scores first. We found a few scenarios that the rate difference is huge if the credit score is low.