Broker vs Bank: FICO Scores

There are many reasons why you should use a broker versus a bank when applying for your mortgage. Brokers are focused on one thing only: your mortgage. This means that their primary job is to help you find the right loan that saves you money. And now, according to research published by the Urban Institute, Brokers give you access to loans at lower FICO scores. This gives you access to credit much sooner than a bank when you are building your credit from a past financial hurdle.

Why are non-bank lenders offering loans with lower FICO than banks?

FHA Loans: Today, brokers originate 80% of FHA loans. FHA loans are government backed and more flexible in terms of credit and past mortgage history. FHA loans are a great option for borrowers who had a foreclosure or short sale in their past that keeps them from getting a conventional mortgage. FHA is also an option for those with tight credit, or low scores.

Debt-to-income: In addition to lower FICO scores, non-bank lenders allow borrowers to stretch their incomes a little further. Some offerings allow up to 50 percent of the borrower's income to be used on housing and debt payments.

What does this mean? It means that even if you've been turned down by a mortgage bank, an independent mortgage broker can help.