The Golden Rule, as it applies to mortgage lending, is: “The person who has the gold, makes the rules.” That is, if you want to be approved for a mortgage loan, you have to meet the investor’s program requirements and answer the sometimes odd or irritating questions of the investor’s underwriter. Believe it or not, mortgage investors, those who actually have the gold and make the rules, are in the business of making more money with their money. If they don’t think you’re a good bet to use their funds, they’ll wait for someone else to come along who is.

The majority of applicants, 73% of the national population, have decent to excellent credit, so the only real question there is how much of a mortgage the applicant can afford based upon their income and current debt load. The remaining 27% of the national population have poor to terrible credit. Those with poor to terrible credit pretty much have to take what they can get. (I can’t tell you how many times I’ve heard the words, “But, I can make the payment.” Yes, and I’ve always wanted a pony and still don’t have one.)

Obviously, I, being a mortgage lender and not a mortgage investor, want to approve every applicant who walks in my door. The truth of the matter is that whether or not they are approved is not up to me. I don’t have the key to the room in back where the buckets of cash are kept. The mortgage investor has that key. Applicants who are well qualified credit wise and income wise are no problem to approve. Anybody can do that. It’s with the marginal applicants that I have to do my best, with the applicant’s assistance, to convince the investor’s underwriter that approving the loan would be in the best interest of their employer, the actual owner of the cash. Sometimes we can file off enough of the corners to make that square peg fit in the round hole and sometimes we can’t.

It’s the marginal applicant’s option and the mortgage lender’s responsibility then to go to a different investor to see if a different program or different underwriter might see things differently. Mortgage lenders care whether or not the applicant is approved. Mortgage investors don’t really care. It’s in their best interest to not make a loan when the likelihood of prompt repayment is questionable. Investors are not in the business of making an applicant’s dreams come true. That’s the job of your mortgage lender. That being said, if the investor can make money and make the potential homeowner’s dreams come true at the same time, well, it’s a great day for everybody.

To break down the range of credit scores further, information in the consumer information section of www.myfico.com, shows that 13% of the national population have ‘primo’ credit scores of 800 or better. (The best score or ‘top of the chart’ is 850). 27% of the population has an ‘excellent’ score of 750 to 799. 18% have ‘great’ scores of 700 to 749. 15% have scores of 650 to 699. I would characterize the range from 650 to 675 as ‘pretty much okay’. The range from 676 to 699 would be ‘good’.

12% of the population has a score of between 600 to 649. I would consider the range of 600 to 625 to be ‘poor’ and from 626 to 649 would be ‘borderline’. 13% have ‘bad’ credit scores of 500 to 599. The remaining 2% of the population have ‘awful’ credit scores of under 500 down to the lowest possible score of 350.

David Griffin has been financing homes in Macon, Warner Robins and all of Middle Georgia since 1983. He is a two-time past president of the Mortgage Bankers Association of Middle Georgia. For an archive of past articles visit www.davidjgriffin.com. (12/6/07)