If the borrower has a satisfactory credit history and the ability to pay timely payments, the borrower may be considered a prime borrower and rated as an A borrower. In this case the loan will be closed using standard mortgage documents referred to as A paper. If he does not qualify for an A paper loan, the borrower may seek financing with companies known as sub prime lenders.
The mortgage industry has adopted a credit risk scoring method. Credit scores reflect credit patterns over time. Lenders frequently use a scoring system known as FICO scores. FICO is an acronym for Fair Isaac Company, the company that created the original scoring system.
A credit report is ordered by the lender and the credit reporting agency establishes a score to help a potential lender determine the risk of granting the loan. The scores range from 375 to 900 points, and in general, a score of 650 or above indicates a very good credit history. Average scores fall into the range between 620 and 650. Several factors can have a negative impact on a credit score:
oHistory of nonpayment
oAdverse Public record information
oEvidence of collection accounts
oRecent...
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