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What the New Credit Score Models Mean for Homebuyers
Starting in 2025, new credit scoring models will be used by lenders to determine the creditworthiness of potential homebuyers. Fannie Mae and Freddie Mac will mandate the adoption of the new FICO Score 10T and VantageScore 4.0 by the end of the year. For those interested in buying a home, these changes will impact their ability to purchase. The good news is that these scores aim to be more inclusive and to show a fuller picture than the old classic FICO scores did.
These new scores have been noted to have better accuracy and consider alternative credit data as well as traditionally reported credit cards and car payments. For example, VantageScore 4.0 allows borrowers to add on-time payments for rent, utilities, and telecom bills. For those with limited debt or who prefer to use cash, this is a big advantage when seeking credit.
The introduction of these new credit scoring models offers more opportunity and accessibility to credit for more individuals. This is particularly true for those with limited credit history or strong alternative credit data. Additionally, the VantageScore 4.0 only requires one month of credit history to generate a score, while FICO 10T still requires at least six months.
Overall, the launch of these credit scores is a significant step towards hopefully allowing access to homeownership to more Americans. By considering alternative credit, these scores may provide lenders a truer picture of the ability of a potential homebuyer to pay their loan and extend credit to those previously unable to qualify.
A Reverse Mortgage: Is It Right For You?
A reverse mortgage is a financial option available to seniors that allows them to free up some of the accumulated equity in their home. This may be an appealing option for obtaining some extra income in your retirement to use for a variety of reasons. There are, however, some important considerations to weigh before borrowing against your greatest investment. Here are some facts about reverse mortgages, and some tips for making the right financial choice.
What Is A Reverse Mortgage?
Sometimes called a lifetime mortgage, a reverse mortgage allows you to borrow against the equity in your home, which can be paid out either in one lump sum or in several payments over time. This amount does not have to be paid back to the lender during your lifetime provided you stay as a resident in your home and it remains your property. That percentage of the value of your home which you have taken out now becomes the property of the lender and will be returned to them after the sale of the home. Your heirs still inherit the property upon your passing, and they have up to one year from that time to either refinance the property or sell it and keep the remainder of the proceeds for themselves.
Do I Qualify?
Depending on where you live, the qualifications for a reverse mortgage may differ. In general, you must be 62 years or older, have no outstanding mortgages on the property upon which you are borrowing, and you must have sought the advice of a qualified financial advisor in order to prove that you fully understand the process. You can use the monies from a reverse mortgage for whatever you want, as there are no restrictions.
How Much Can I Get?
Again, depending on where you live, the amount of equity you can receive from your home with a reverse mortgage will differ. In the U.S. there is a maximum limit of $625,500, no matter what the value of your home, but for most homeowners the actual amount will be considerably less. The actual amount you will get depends on a variety of factors such as the value of your property, the interest rates at that time, your age, and whether you want a lump sum payment.
Reverse mortgages can be a great addition to your retirement income, but being sure you know all the facts before going ahead will ensure peace of mind for both you and your family in the long term.
If you would like to learn more or have any questions, don’t hesitate to reach out anytime at 817-564-3878 or visit www.quimbyrealty.com.
