We recently told you about FICO score changes that were being made that could make getting a mortgage easier for Gulf Shores home buyers.
Well, not so fast.
What nobody mentioned about the score, dubbed FICO Score 9, is that most Gulf Shores home buyers aren't likely to see any direct benefit from it any time soon, very possibly not for years.
That's because the two dominant financing sources in the mortgage market — Fannie Mae and Freddie Mac — aren't planning to use the new score in evaluating loan applicants for the foreseeable future. And major banks and mortgage companies aren't jumping to adopt it either.
None of this detracts from the merit or potential value to consumers of FICO's new score. The company says that by separating out medical debt-collection issues — which are commonplace negatives in millions of consumers' credit files — from other types of collection actions, the FICO 9 model will more fairly rank the actual risks posed by some applicants compared with others. For borrowers whose sole major negative credit file account is an unresolved medical debt, Fair Isaac estimates that the new model will increase scores by a median 25 points.
FICO 9 also is designed to more fairly treat applicants who have limited accounts on file with the credit bureaus — often young, first-time Gulf Shores home buyers or consumers who have made minimal use of credit cards and other forms of personal credit.
Gulf Shores Home Buyers Not Likely To See Any Help
So on the surface, the advent of the new score is a big deal. But here's the real world: New FICO score models only matter in the mortgage market if lenders choose to use them to evaluate applicants. And, based on discussions with leaders in the mortgage field, FICO 9 is a long way off from adoption. It's not likely to help many Gulf Shores buyers any time soon, despite the hype.
Among other reasons, it can cost substantial sums of money to retool complex automated underwriting systems, especially at Fannie and Freddie. Lenders have to weigh the costs and benefits.
Will the relatively small improvements be worth the expense and hassles? And with all the other regulatory changes mandated by recent financial reform legislation, do we have the time and manpower to devote to analyzing the effects of FICO 9?
The sobering answers for Gulf Shores home buyers appear to be no.
But stay tuned. As with anything else, these things are subject to change. And if and when they do, we'll let you know right here.
Check out our other articles and news affecting Gulf Shores home buyers when it comes to mortgages by clicking on the Gulf Shores Mortgage Info link to your right under Gulf Shores Real Estate Categories.