Until early 2007, lenders made subprime loans to borrowers who had FICO scores of less than 620. But those ratios are rising in the heat of the subprime market shake-out. Borrowers who once qualified with a FICO of 620 have watched the FICO requirements move to 640 and up. Those applying for 100% financing could once qualify with a FICO of 580, but that number has changed to 620, coupled with almost double-digit interest rate pricing. Today, except for VA, most lenders will not lend at all on 100% financing.
• Major institutional lenders like to see FICO scores above 700, and those borrowers receive the lowest interest rates and terms.
• Borrowers whose FICOs fall between 600 and 700 receive less favorable terms.
• Borrowers with FICOs below 600 are finding it difficult to obtain financing at any interest rate.
Tip: FHA loans do not require a FICO score and may be an option for borrowers hoping to refinance.
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