Can I Qualify For Conventional Loan With Low Credit Scores?
Conventional Loans are different than government loans in a sense that they are extremely credit sensitive due where the lower your credit scores, the higher your conventional mortgage rates. FHA Loans, VA Loans, and USDA Loans are considered government loans because they are either insured and/or backed by the government in the event the mortgage loan borrower defaults. For example, FHA Loans has extremely low mortgage rates. FHA mortgage rates are much lower than conventional mortgage rates and the reason why FHA Loan mortgage rates are so low is because the Federal Housing Administration guarantees FHA approved mortgage lenders in the event of borrower default on FHA Loans. Same with VA Loans. VA Loans do not require any down payment but VA Loans has one of the lowest mortgage rates out of any mortgage loan program. The reason being so low with no down payment required is because if the VA mortgage loan borrower defaults on his or her VA Loan, the United States Department of Veteran Affairs will guarantee the VA mortgage lender against loss from the foreclosure. All government loans are originated and funded by banks and private lenders and these lenders need to follow the strict guidelines of either FHA, VA, or USDA. With Conventional Loans, things are different. There is no guarantee by any government entity on conventional loans. Conventional mortgage lenders normally want the mortgage loan borrower to put 20% down payment on a home purchase. Conventional mortgage loan borrowers can put as little as 3% or 5% down payment on a home purchase. Any conventional mortgage loan borrower who puts down less than 20% down payment, private mortgage insurance is required by the mortgage lender. Private mortgage insurance is paid for by the mortgage loan borrower for the benefit of the mortgage lender in the event the mortgage loan borrower defaults on his or her conventional loan. You can qualify for conventional loan with low credit scores. Minimum credit scores required on conventional loans is 620 FICO.
Conventional Loan Requirements
A conventional mortgage loan borrower can qualify for conventional loan with low credit scores. By low credit scores, the minimum credit scores required on conventional loans is 620 FICO credit scores. Any conventional mortgage loan borrower with credit scores under 620 FICO will not qualify for a conventional loan and needs to try to boost their credit scores over 620 FICO. Besides meeting the minimum 620 FICO credit scores, the maximum debt to income ratios allowed on conventional loans is 45% debt to income ratios. If you had a prior bankruptcy, there is a four year mandatory waiting period after the discharged date of your Chapter 7 Bankruptcy to qualify for a conventional loan. If you had a Chapter 13 Bankruptcy, there is a two year mandatory waiting period after the Chapter 13 discharged date to qualify for a conventional loan. If you had a deed in lieu of foreclosure and/or short sale, there is a mandatory four year waiting period to qualify for a conventional loan. If you had a foreclosure, the waiting period is 7 years to qualify for a conventional loan.
Down Payment Requirements On Conventional Loans
Fannie Mae now allows a 3% down payment on conventional loans for first time home buyers. Freddie Mac allows 3% down payment for home buyers who have not owned a home for at least three years. Normally, the minimum down payment requirement for conventional loans is 5% down payment. To get the best mortgage rates on conventional loans, the mortgage loan borrower needs a 740 FICO credit score and 20% down payment. Prior bankruptcies, foreclosures, deed in lieu of foreclosures, or short sale have no impact on mortgage rates with conventional loans.