620 FICO Versus 580 FICO: 56.9% DTI Versus 43% DTI
For a mortgage loan borrower to qualify for a 3.5% down payment residential FHA mortgage loan, the minimum credit score required is 580 FICO. A mortgage lender, such as myself, who have no mortgage lender overlays can get borrowers with credit scores of 580 FICO scores approved for a mortgage loan all day loan as long as the borrower can get an automated approval per Automated Underwriting System. However, if your credit scores are between 580 FICO and 619 FICO, your back end debt to income ratios will be capped at 43% and your front end at 33%. The debt to income ratio cap is much greater for borrowers who have credit scores 620 FICO versus 580 FICO which we will discuss later on this blog. With credit scores under 620 FICO, mortgage rates will be higher, and rental verification may or may not be required depending on what the Automated Underwriting Systems comes back with.
580 FICO Versus 530 FICO: 10% down payment Versus 3.5% Down Payment
If your credit scores fall between 530 FICO and 580 FICO scores, you can still get approved for a FHA insured mortgage loan, however, a 10% down payment is required on your home purchase. There are other mortgage lending guidelines that apply for those in this credit score category such as rental verification, reserves, and higher mortgage rates. Borrowers with credit scores just slightly under 580 FICO might want to have their mortgage loan originator help them boost up their credit scores over the 580 FICO threshold before starting the mortgage loan approval process.
620 FICO Versus 580 FICO: 56.9% Debt To Income Ratios Plus Many More Benefits
Having credit scores of 620 FICO versus 580 FICO offers many benefits. One of the greatest benefits besides the 3.5% down payment is that the back end debt to income ratios are capped at 56.9% and the front end debt to income ratios are capped at 46.9%. Rental verification is not required and mortgage rates are lower. If you fall short of the 620 FICO score threshold and have higher debt to income ratios, it will be worthwhile to work with your mortgage loan originator in trying to boost your credit scores over the 620 FICO threshold.
Mortgage Lender Overlays: 620 FICO Versus 580 FICO
I specialize in residential mortgage loans with no mortgage lender overlays in Illinois, Florida, California, Wisconsin, and Indiana. Many mortgage lenders have their own internal mortgage lender overlays where they have their own cutoff credit scores such as 640 FICO. However, the 640 FICO credit score requirement is not federal lending guidelines but the mortgage lender’s own lending guidelines. It is unfortunate that many mortgage loan borrowers and professional real estate agents do not know this and it is sad that many mortgage borrowers and realtors give up just because the borrower got denied for a mortgage loan. I originate and close on residential mortgage loans with credit scores under 620 FICO every month. You can have lower credit scores, prior bad credit, and other periods of bad credit history and get approved for a mortgage loan in Illinois, Florida, California, Wisconsin, and Indiana. If you have been told NO for having lower credit scores, open collections, or prior bad credit in Illinois, Florida, California, Wisconsin, or Indiana, please contact me at 262-716-8151 or visit me at www.gustancho.com .
FHA BACK TO WORK EXTENUATING CIRCUMSTANCES MORTGAGE PROGRAM IN ILLINOIS, FLORIDA, CALIFORNIA, WISCONSIN, INDIANA: ONE YEAR WAITING PERIOD AFTER BANKRUPTCY, FORECLOSURE, DEED IN LIEU OF FORECLOSURE, SHORT SALE
If you are a mortgage loan borrower in Illinois, Florida, California, Wisconsin, or Indiana and had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale one year ago due to unemployment or underemployment which resulted in at least 20% reduction of your household income, I can help you get a mortgage loan. You need to have been unemployed or underemployed for at least six months prior to the initiation of your bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale in order to qualify for this program. Please feel free to contact me so we can discuss.