As the country lurches toward recession in the midst of pandemic-related uncertainty, cohort after cohort finds themselves affected by changes. The latest to discover a new hurdle to jump: prospective home buyers. In order to reduce the risk of default, major lenders have announced that they will require higher credit scores going forward.
What Are Banks’ New Requirements? While each bank has different borrower criteria, the one thing that seems to be true across the board is higher minimum credit scores. Wells Fargo and US Bank have both announced new minimum credit scores of 680. Chase said that they will now require a minimum score of 700, paired with a minimum down payment of 20 percent. Previously, Chase required a minimum down payment of 3.5% for most borrowers.
The changes also apply to special loans like VA and FHA loans. These loans have historically had more lenient requirements. However, in the new credit crunch, banks are increasing credit score requirements for them, as well. Wells Fargo typically featured credit score requirements as low as 580 for FHA and VA loans, but has increased the minimum by 100 points. Both better.com and Navy Federal Credit Union have stopped offering FHA loans altogether. Navy Federal Credit Union says that they hope to begin offering FHA loans again next year, but nothing is fully confirmed at this point.
How Can You Protect Yourself from CreditCrunch2020? With unemployment rates continuing to soar and businesses in peril, most people are unlikely to get out of this crisis completely unscathed. If you are hoping to buy a home in the near future, however, there are steps you can take to protect your chances.
First, be careful to protect your creditscore from dips and fluctuations. Pay all bills on time whenever possible. Late or missing payments are one of the criteria that are most likely to cost you points.
If you are unable to make a payment to a creditor on time, be proactive. Many credit card issuers are offering late payment forgiveness. In most cases, they will not charge a penalty or report you for a late payment. The key is that you have to ask. Call as soon as you think you may not be able to make a payment on time.
Don’t apply for new credit at this time. Lenders see recent inquiries as a sign that you may be overextended. As a result, every new credit inquiry lowers your score slightly for a period of time.
And, try to put as much money aside for a down payment as possible. The more you have saved, the less likely a low credit score will cause you harm.
Not sure whether you have a score that will help you secure a loan? Get in touch. We can help you correct errors and eliminate issues that are keeping your score lower than it should be. By ensuring that your score is as high as possible, we can help you qualify for a loan for a home to call your own.
