Real Estate Agents & FICO Scores
Being in a business that relies heavily on mortgage approval is a great reason for real estate agents to feel comfortable and confident about discussing credit scores. Realtors and FICO scores make a powerful combination and can equal great savings for potential buyers.
Most realtors tell me privately they fear discussing credit since they have little knowledge on the subject and find it very confusing. Even worse, what if their buyers have more knowledge than they do about credit? This can cause the buyer or seller to lose confidence in their real estate abilities and walk away puzzled and uncomfortable. This is definitely understandable but knowledge is power and with it comes confidence.
There are a few simple facts that a realtor can be sure of and suggest with total confidence:
- Bankers use the buyers FICO scores to evaluate their risk potential and predict their ability to pay back a mortgage. If you aren’t sure which score you bought, the wrong one may cost you a loan or a lot of money in higher interest payments.
- There are many scores offered to purchase online that are different than the mortgage lending FICO scores. There are Plus scores, Credit Karma, Vantage, & Equifax to name some.
- If buyers do not know the name of the score they purchased online they must review it and make sure it is a mortgae lending version of the FICO score.
- FICO scores range from 300-850, so if the score purchased has a different range it is not a FICO score.
- When a consumer purchases a FICO score online it will NOT hurt their credit scores. Only when a third party pulls credit does it become a “Hard Inquiry” and hurt scores.
- If a buyers FICO score is not a 740 and above they will pay premiums on financing or they may be denied funding depending on the type of loan. Fannie or Freddie insured loans have measurements for scores where applicants will be charged points (1% of the loan amount) upfront and higher rates if the score is below a certain threshold. These lowered score levels can equal costs to applicants of thousands in upfront charges and hundreds of thousands more over the life of a 30 year loan. For example, on many federally insured loans, with scores below 740 but above 660 minimum FICO score, consumers can pay over 1-2 points upfront or almost 1% more in interest over the life of the thirty year loan. On a $400,000 mortgage that could be $11,000 upfront in points or about $76,000 more in interest payments over the life of the loan.
- By purchasing FICO scores well in advance a buyer has the opportunity to get feedback from credit experts on how to increase scores and save themselves a lot of money or a rejection for a loan. Changes of credit scores by 20 points can be the difference between loan approval or rejection for many loans. Changes in FICO scores can also equal savings of $20,000 – millions in interest payments over the life of a thirty year loan (depending on its size).
If a real estate agent has the ability to provoke thought and action that could ultimately equal savings of hundreds of thousands of dollars in mortgage payments and have a successful real estate closing, think of the future referrals and income that can be generated!