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"What is a FICO Score?" FICO scores are numeric representations of your credit profile. The higher the FICO score the better credit risk you are. FICO is a product of Fair, Isaac Company thus the term FICO. These have been around for several years but started to be used in the mortgage lending business in 1995 for the purpose of keeping down the expense associated with Home Equity loans. Y ou needed a certain minimum score to get such a loan. In 1996 both Freddie Mac and Fannie Mae are going to insist on a FICO score on your credit report. You can be denied a mortgage loan if your score is too low. They are based on years of computer modeling aimed at predicting who might be a credit risk. Their purpose is to reduce the cost of examining a credit report and speed mortgage approvals. Your FICO score can be determined during the process of becoming pre-qualified and allowing a qualified mortgage professional to review your credit. Pre-qualifying is a process whereby a loan officer obtains information about you, either over the telephone or face-to-face and indicates the loan amount you can qualify for and the best type of loan to meet your particular needs. The loan officer will want to know information about your income and a list of your debts. The lender through a series of calculations will be able to determine the size of a loan you qualify for based upon loans available in today’s market. The term pre-qualified simply means that a mortgage or real estate representative has examined your income to debt ratios...this does not mean pre-approved. Pre-approval is a step beyond pre-qualifying. In a pre-approval we send the credit part of the loan package to the lender and get you approved for a certain type of loan with a particular lender before you have found or made an offer on a property.
Pre-approved means that a mortgage or real estate professional has examined, submitted and received acceptance on your financial capabilities of qualifying for a mortgage based upon your income to debt ratio, loan information, and credit profile. The loan professional that has made this information available to you specializes in assisting those individuals with obtaining a home loan whether for purchase or refinance. Your loan professional in most cases can advice you on the best approach and help you with your specific loan requirements.
