23rd Oct, 2011

More Credit Scrutiny Coming for Hill Country Real Estate Borrowers

As readers negotiate the pathway towards owning Texas real estate in the Hill Country, we offer important information for anyone looking to borrow money to their Fredericksburg TX home or Texas land.  It may help some newer borrowers and could be uncomfortable for others.

More new standards are understandably being adopted by lenders, the same people who are still stuck with heaps of bank-owned properties and distressed borrowers.  The Chicago Tribune recently shed light on a new score being developed to help financial institutions discern good and not-so-good credit risks.  This score incorporates personal information about borrowers.

Credit reporting companies have been around since the 1950s.  Fair Isaac Corp. (FICO) generates scores using information from three main credit-reporting companies:  Transunion, Experian, and Equifax.  But these scores did not become widely used in the mortgage industry until 1995 when Federal agencies such as Fannie Mae, Freddie Mac, and the Federal Housing Authority began recommending them to lenders in the housing industry.

FICO scores are supposed to provide lenders with mainstay indicators about the credit worthiness of Texas Hill Country homebuyers from across the nation by showing how well they have paid back previous loans.  But FICO is developing new tools “to help the lending industry dig deeper,” Podmolik says.

FICO and CoreLogic announced they are collaborating to create a different score that will reflect personal habits and payment histories on a variety of levels.  This number will include payday loans, evictions, child support payments, status of payments such as utility bills, rent, and cell phone payments.  Some credit reporting agencies have already been providing lenders with estimates of income and available data on timeliness of rental payments.

Tight lending standards are the norm these days.  With the Fed keeping interest rates low, lenders do not have higher interest payments to make up for the losses caused by defaulting borrowers.  It is possible that this new score will help financial institutions.  It may help some wealthy buyers who usually pay cash and young borrowers who have little credit history.  It may not be as kind to other good applicants who happen to have encountered some challenges along the way to their new Hill Country homes.

For expert guidance in your personal search for the ultimate piece of the Hill Country, please call Dale E. Cook, MBA and owner of SAGE – Premium Texas Real Estate at (830) 992-0056.

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