NW Indiana Loan Guy Blog

Are you familiar with the term “Stealth Inflation”? It’s kinda like raising the prices on something without anyone really noticing.

For instance, say you love a particular brand of peanut butter and always buy the 16 oz jar for $3.49 (I’m just making up numbers here, so stay with me). The next time you buy your favorite peanut butter, it is still $3.49, but the jar contains only 14 oz. To make it worse, the company got sneaky and is using the same size jar, but the bottom is now concave so it holds less without being obvious about it.

Chances are, you may not have noticed as they do it over time. If you have, congratulations. My personal favorite (hint of sarcasm intentional) is that my soap now looks like someone has been whittling out the middle of the bar. The price has not gone down, but I get fewer uses from the soap.  

Would a mortgage company do this? Sure… why not? Several months ago, you could get an FHA mortgage with a 580 middle score, no problem. Pretty soon, while you could still get the loan, if you had a score under 620, you would have to pay a little more in interest as a “penalty”.

Fast forward to recently… Most lenders (banks) are requiring a 620 minimum middle score and a few have gone to 640. But, and here is the key, but if you have a score under 660, you may pay a little higher rate because of the “penalty” once again from a few of the lenders. I anticipate that this will continue with others also.

Cutting to the chase: Although the government has announced an initiative to lower rates across the board, the lenders themselves may see to it that not everyone benefits. As I have always said, risk = rate. The greater the risk (meaning the lower the score), the higher the rates the client will pay. I don’t mean to say or even infer that the borrowers will not see any benefit from the rate decreases (if and when they come), but some may see more benefit than others due to the lenders being overly cautious.

The solution: keep your credit score as high as possible. Visit www.annualcreditreport.com once a year to check your credit reports for errors. Since it is a fact (2004 PIRG report) that 79% of all credit reports have errors and 25% are significant enough to get turned down for a loan, this is a valuable use of your time and there is NO charge. If you need some assistance improving your credit, I suggest you visit www.usccraonline.com and register on the site for access to all the reports, videos, and downloads. You can even register to get $300 in FREE gasoline.

Now is a great time to purchase a new home or refinance an existing one, but since the lenders are being so cautious, your credit score is more important than ever. If you have questions about your credit or available loan programs, please feel free to contact me at 219-695-0369 or send an email to scott@nwiloanguy.com.

Scott Swinford, your Northwest Indiana Loan Guy

Your source for Indiana FHA loans, Indiana FHA 203(k) Streamline loans, Indiana USDA Rural Development loans, and much more.

Credit Issues? Not an issue for us! Visit http://www.usccraonline.com/ and register to get $300 in FREE gasoline.