Is Good Credit Good Enough?

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Here’s something we hear frequently from our prospective jumbo mortgage clients: “I have an 800 FICO so I know I’ll qualify.”

Here at RPM, we pride ourselves on being a great jumbo lender. Because of our geography and clientele in the San Francisco Bay Area, we encounter a lot of higher loan amounts. Our pricing is very competitive and we have an ever-expanding list of investors who can cover the needs of just about any jumbo loan scenario that can realistically be done these days. Moreover, we retain control of the underwriting of the vast majority of our jumbo loan programs, so we can exercise “make sense” judgment and get files approved where many other banks and brokers cannot.

Yet, we are not immune to the industry’s quirks. And its treatment of credit tradeline requirements can certainly confound the borrower who may be working with a less-experienced loan originator or lender. As we’ll see, the credit requirements for jumbo loans reach beyond a borrower’s FICO score and delve deeper into the components that comprise those numbers, namely:

• Credit history — depth and age of tradelines.
• Blend of credit — distribution of open credit between mortgage, installment and revolving debt.
• Use of credit itself — how recently have accounts been used?

If you are in the market for a jumbo mortgage presently, or if getting into the market is on your radar, it’s important to involve a mortgage professional as early as possible, as some of these requirements simply cannot be met in the time period it would take to close a traditional escrow. Let’s look at one of our jumbo investor’s credit profile requirements:

• Minimum of 3 open tradelines with minimum of 12 month history for EACH borrower.
• Authorized user accounts cannot be used to meet minimum tradeline requirement.
• Credit depth must be a minimum of 2 years.
• All 3 tradelines must have had current activity.

Or another’s:

• Minimum 3 tradelines open and active for at least 24 months.
• At least one of the three tradelines must be a mortgage or installment loan.
• Remaining tradelines must be rated for 12 months.

closeup of credit cardsSo, a moral of this story might be that you may indeed have a very good FICO score. But if you do not demonstrate to a jumbo mortgage investor that you can produce a high score by way of the behavior that they believe will most likely lead to repayment of their loan, you may find yourself on the outside looking in. Remember, if you don’t like to use credit – if you pay cash for that auto – if you eschew credit cards – this can be highly beneficial financial behavior from a personal standpoint, but it can leave us, as the mortgage lender, in the dark about whether you’ve got the right credit curriculum vitae.

If you have questions about a jumbo home loan and/or about how your credit report and profile will be viewed by a jumbo lender, get in touch with us today. An RPM advisor can help you make sense of what it takes to qualify for a jumbo mortgage, and in many cases, we can find just the right investor to work with your existing credit profile. Your credit may already be excellent but we’ll make sure it’s jumbo good too.
Robert_Spinosa_BW

By Rob Spinosa

For more information about Rob, visit his website at https://www.rpm-mtg.com/Agent/Robert_Spinosa.