This potential client is applying for a $100,000 Loan and currently has a  FICO score of 550. They live in Cincinnati Ohio. The client has a stable job along with his wife at one of the local universities as a heating technician. He has been with the university for many years and expects to continue with them.  He did mention that he has not received many raises, but then it is a stable job in today’s economy.

This client has several questions in addition to applying for a large loan which we have taken to be really a mortgage loan. He wants to consolidate his current small mortgage along with several small loans and complete several upgrades around his home with the remaining money.

His questions are:

• What is a FICO score and how does it impact him?
• Will his home need to be appraised?

The second question is easy to answer. The answer is yes he will need to have his home appraised. Since the real estate market has been so volatile, lenders will want to confirm the equity that is available in his home. They take the appraised price, deduct any current mortgage to obtain the remaining equity. They will loan a portion of this amount to him as a new mortgage in this case. The amount will depend on his credit rating and local rules they have about risk etc.

The first question relates to the clients credit rating.  A FICO score is a calculated score taking into account payment history, current debts, length of payment history, the new credit application and the types of credit in use. Customers with scores of 700 or higher are usually given the best competitive interest rates since the risk is perceived to be low on the part of the lender. Scores in the range of 500 to 700 are considered more risky by lenders and they tend to charge more for customers applying for loans and mortgages with credit ratings in this range.

In the example loans at the bottom of this post, we have assumed a $100,ooo loan, with a 15 year term and interest rates that correspond to someone who has a FICO score of 550,  500 and greater than 700 to show the difference a good credit rating can make. These rates are current at time of writing and will vary over time. With a credit rating FICO score above 700, you might be able to find a mortgage of 3%, while at 500, the rate is 10% or even higher reflecting the risk that the lenders perceive with your rating. These are substantial changes and represent hundreds of dollars difference when you compare monthly payments, and thousands of dollars difference in the total cost of borrowing.

Our client for this loan in Cincinnati Ohio, could obtain a much better interest rate if he had a better FICO score. He may want to look at why his particular score is were it is and then see what can be done to improve the rating. It could save him a lot of money over the life of the mortgage. Our client has some decisions to make regarding whether he wants to proceed now with the loan or work on his FICO score before proceeding.

Home/Mortgage Loan Amount :: $ 100,000

Home Loan Application and Processing Speed (when do you need the funds):: within the next 60 days

Do you currently have a mortgage? :: yes

Bank Name and Branch :: Guardian Savings Bank, Colerain Ave

What City/Town, State and County do you live in? :: Cincinnati, Ohio

Zip :: 45239

What is your employment field? ::Heating Technician for a local  University

Employment Position :: Heating Technician

When are you paid? (monthly/weekly/biweekly):: Biweekly

Your credit rating to be – excellent, fair, or bad? :: fair based on my FICO score

How did you find us? :: Searching for FICO loans on the net

How are you paid? (direct deposit/paper check):: direct deposit

Gross Amount Per Paycheck :: $ 2500

Do you agree to have this information published online, without your PRIVATE information of course? :: yes , no problem

Extra information here please (some detail):: I am applying for a loan of $100,000 and I have a FICO score of 550, however I really do not understand what a FICO score is and what it means in terms of obtaining a loan. If you could help me understand what this is and how it affects my loan application, it would be a big help.

I am applying for this loan to do a bunch of things. My wife and I would like to pay off several small loans, a small balance on our single credit card and spend a little money updating our home with some minor landscaping and painting indoors. We are also replacing the rugs in our house as well. They are pretty old and it is just time to replace them. We thought if we got this loan and do all of these things, we could actually reduce our monthly payments by not having to make the payments on these loans.

We have a small amount  remaining on the existing mortgage and we have lots of equity remaining in our home. Do you think we will need our home appraised since we are essentially putting a new mortgage loan on the house?  Our house has not been appraised for some time, and we are curious regarding the current value given all of the twists and turns in the real estate market. From what we read, we are one of the lucky ones, since we have a small mortgage and we have own our home for many years, well before the appreciation and then the depreciation of real estate began.

Note to Lender :: Regarding my job, I work for a local university as a heating technician. I am part of the maintenance staff responsible for keeping the heating systems running, doing repairs and upgrades as needed. My wife also works for the university and we both have been with them for more than ten years.  Our jobs have been and are still stable. although we have not received many raises in the past few years, and are not likely too, our income is stable. Please answer out questions and hopefully approve our loan as well.

 

Category: Home Mortgage Loan	APR 7.0%	APR 10.0%	APR 3.0%
Loan Principal	$100,000	$100,000	$100,000
Payment Schedule	Monthly	Monthly	Monthly
Length of Term	15	15	15
Amount to be paid	$152788.07	$175411.52	$122623.46
Total interest paid	$52788.07	$75411.52	$22623.46
Paid per installment	$837.19	$961.16	$671.91

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