Tracy's Credit Tip of the Month | Mt Kisco Real Estate

Tracy's Credit Tip of the Month

Wells Fargo gears towards the subprime mortgage market. What does that mean for home buyers, realtors, bankers, and other finance professionals? With the refinance boom coming to an end and banks looking to find new ways to increase profits subprime loans are becoming a new focus. Wells Fargo, the mortgage leader, will now embrace subprime loans, which means other banks are sure to follow. In the past Wells Fargo would not even entertain a loan if the FICO score was less than 640 but now they are looking at scores of 600 and up. Due to a loss in profits of the dwindling refinance market banks are beginning to lean towards business lending and subprime loans. How will this impact those looking to purchase real estate? There are many individuals who have not been able to qualify for a loan in the past 3 or more years due to a loss of income and poor credit scores. Most mortgage banks were not interested in working with these individuals but now consumers may have a better chance to become homeowners and get approval on a mortgage. Real estate agents may find more buyers coming into the market for purchases due to this move to subprime loans. The detriment of these loans is that they can be costlier due to higher interest rates and fees in response to higher risk. Those that may now be able to afford these loans and enjoy home ownership can also work towards better choices and lower costs down the road. Once a lender closes on a subprime loan the borrower should begin improving credit by working with a professional credit restoration company as well as learning how to build good credit. Once the borrower's credit standing has improved they can become a candidate for a refinance which will reduce the interest rate and cost of the loan. The borrower, realtor, and the mortgage banker all win in this situation since the borrower gains a property and the opportunity to save in interest once a refinance occurs. The realtor makes a sale and the banker has the potential to close two loans and generate more referrals due to happy clients and referral sources!