Mortgage Insurance credit policy Tightens… again

MGIC [Mortgage Guaranty Insurance Corporation] has tightened its credit policy again [effective March 3, 2008].  The days of 100% financing with credit scores in the 500’s are long gone.  MGIC is the first of our mortgage insurance providers to withhold mortgage insurance for 100% financing to anyone below 680 credit score.  The guideline changes also disqualify home buyers with less than a 620 credit score from purchasing mortgage insurance at all.  Cash out refinances of investment properties and any Pay Option Arms [or Loan the can negatively amortize] will no longer be acceptable. 

What does this mean for the average consumer?  How do first time home buyers with less than 20% down get financed?

Fortunately for us, there are a few other mortgage insurance companies that have not made this policy change… yet.  Until all the mortgage insurance companies follow suit, our clients with credit scores 620-680 should still be able to attain conventional financing.  Right now most first time home buyers that fall into this category are still able to get approved through the FHA.  The FHA programs have been getting more and more aggressive, picking up some of the slack for Fannie Mae and Freddie Mac.  The FHA does still require 3% down unless you are able to combine the FHA product with an eligible grant from a source like the MHDC.  It is more important than ever to have your credit reviewed and your loan pre-approved prior to look for your next home.