FHA Minimum Credit Score Guidelines
FHA Minimum Credit Score Guidelines Requirements
2015 FHA minimum credit score guidelines to qualify for a 3.5% down payment home purchase mortgage loan is set at 580 FICO credit score. If your credit scores fall between 530 FICO and 579 FICO, you can still qualify for a FHA Loan but the minimum down payment requirement is 10% down payment. Reason why home buyers with credit scores under 580 FICO credit scores require 10% down payment is because mortgage lenders view lower credit score mortgage loan borrowers high risk. The higher a mortgage loan borrower’s credit score is, the lower the interest rates are. Credit scores is associated with risk in the eyes of mortgage lenders. Mortgage lenders view lower credit score mortgage loan borrowers as having a higher chance of a mortgage loan default.
What Determines Mortgage Rates And FHA Minimum Credit Score Guidelines
Having prior bad credit such as older unpaid collection accounts, prior late payments, prior bankruptcy, prior foreclosure, prior deed in lieu of foreclosure, prior short sale do not have any bearing with what mortgage rates the mortgage loan borrower is quoted. The sole determinent on interest rates is credit scores. You can have a prior bankruptcy and foreclosure but as long as you have high credit scores, it will not affect your mortgage rates. Other factors in mortgage rates besides credit scores are the property type. For example, mortgage rates on condominiums and multi family properties are higher than mortgage rates on single family homes because mortgage lenders classify condominiums and multi family units. Also, second home and investment home financing have higher mortgage rates than owner occupant home financing because mortgage lenders view second home and investment home financing as higher risk. In the event a mortgage loan borrower faces a personal financial crisis, the chances are that the mortgage loan borrower is less likely to default on his or her owner occupant home than he or she is likely to default on their second home or investment home. This is the mentality of mortgage lenders.
Credit Scores And Mortgage Rates
Even though the FHA minimum credit score guidelines may be 580 FICO to qualify for a 3.5% down payment home purchase mortgage loan, having higher credit scores is a plus. Mortgage loan underwriters really scrutinize mortgage loan applicant with under 620 FICO credit scores. First and foremost, mortgage loan applicants with credit scores of 620 FICO and under will definitely have higher mortgage rates since the mortgage lender classify them as higher risk. Remember that mortgage lenders determine mortgage rates by credit scores. The lower your credit score, the higher your mortgage rates. The lower your credit score, the higher the risk is how mortgage loan underwriters view mortgage loan applicants. It is no just mortgage lenders. All creditors will judge a loan applicant that way. Same with auto loans. The lower your credit scores, the higher your automobile interest rate will be.
Verification Of Rent
Other factors of having a lower credit score is that mortgage lenders may require verification of rent for mortgage loan applicants who have lower than a 620 FICO credit score. They may also require reserves as well. Many mortgage lenders will not allow the mortgage loan applicant to get gift funds for their down payment if their credit scores is under 600 FICO. Bottom line is if you have lower credit scores, try to boost them up. To qualify for a FHA loan with lower credit scores, please contact me at 262-716-8151 or you can get a pre-approval by clicking APPLY ONLINE NOW and complete the 4 page online application. I will get alerted via email and I will contact you to go over the information and issue you a pre-approval letter.
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