Credit Card Balances Impacts Credit Scores To Qualify For FHA Loans

How Credit Card Balances Impacts Credit Scores To Qualify For FHA Loans

This ARTICLE On Credit Card Balances Impacts Credit Scores Was UPDATED On May 17, 2017

High credit card balances impact credit scores to qualify for FHA Loans. There are minimum credit score requirements to qualify for FHA Loans and other mortgage programs.

  • For example, FHA requires a minimum 580 FICO Credit Score to qualify for a 3.5% down payment home purchase FHA Loan.
  • Conventional Loan Requirements are set by Fannie Mae and Freddie Mac.
  • Both Fannie Mae and Freddie Mac require a minimum credit score of 620 FICO to qualify for Conventional Loans.
  • Many mortgage applicants do not realize that credit card balances impacts credit scores to qualify for not just FHA Loans but mortgage loans in general.
  • Just paying down credit card balances can drastically improve their credit scores and home buyers can meet the minimum credit score requirements.

FHA Loans With Under 580 FICO And Bad Credit

FHA Loans are the best mortgage loan program for home buyers with bad credit and lower credit scores. Home buyers can qualify for FHA Loans with under 580 Credit Scores. Home buyers can qualify for FHA Loans with credit scores down to 500 FICO.

Here are the requirements for FHA Loans with under 580 credit scores:

  • The Gustan Cho Team offers FHA Loans with under 580 FICO Credit Scores with an approve/eligible per Automated Underwriting System.
  • FHA Guidelines On Under 580 FICO Credit Scores require that mortgage applicants have 10% down payment versus a 3.5% standard down payment on home purchase. 
  • There are many cases where a mortgage loan borrower who falls just shy of the credit score minimum requirements of 580 FICO where we can normally help them boost their credit scores to at least a 580 FICO.
  • There are many possible solutions to boost the mortgage applicant’s credit score so they meet the mortgage lender’s minimum credit score requirements.

Boosting Credit Scores To Qualify For FHA Loans

  • One of the most effective ways of boosting your credit scores is paying down your credit card payments.
  • Borrowers with little to no credit may have lower credit scores.
  • Mortgage applicants with low credit scores may be able to get their credit scores higher by getting secured credit cards.
  • Three secured credit cards can boost a mortgage applicant’s credit scores by 100 Points if they have no active credit tradelines.
  • For maximum effect, consumers should get at least three secured credit cards with at least a $500 credit limit.
  • Maxed out credit cards will plummet a consumer’s credit scores.
  • Paying down credit card balances will instantly boost credit scores.
  • Most lenders have FICO simulator which is a software where it will state what a mortgage borrower needs to do to maximize credit scores.

Paying Down Credit Card Balances Impacts Credit Scores Instantly

Maxed out credit card balances impacts credit scores. By paying down credit card balances, it will instantly improve credit scores.

  • Credit reporting agencies penalize consumers who have maximized their credit limit on their credit cards. 
  • Borrowers can pay down credit balance below the 10% credit limit level to maximize their credit scores and qualify for FHA Loans. 
  • For maximum effect, pay down all of credit card balances down to a $10.00 balance.
  • Do not pay it down to zero because a zero balance credit card will not give you the most positive effect on credit scores. 
  • Just leave a $10.00 balance on all of credit cards because it shows an active debt and history that consumers are paying current debts on time. 
  • The available credit limit is such a powerful force in maximizing consumer credit scores that just by paying down credit cards will boost your scores noticeably.

Advice On Improving Credit Scores To Qualify For Mortgage

  • Mortgage lenders have a credit score analyzing program, often called FICO simulator, which will show credit score improvements.
  • The FICO simulator is a credit score calculating system and advises on what to do to maximize credit scores.
  • This can be by suggesting what type of credit can boost credit scores.
  • It will suggest paying down credit cards, adding new credit, or other creative solutions for consumers to increase their credit scores.

Credit Scores Versus Credit Scores In Qualifying For Mortgage

Mortgage applicants need to meet minimum credit score requirements, however, they must also be credit qualified.

Here are the FHA Guidelines On Qualifying For FHA Loans With Bad Credit:

  • The Gustan Cho Team has no overlays on government and conventional loans
  • 580 FICO minimum credit score required to qualify for a 3.5% down payment FHA home purchase loan
  • Borrowers with credit scores between 500 and 579 FICO can qualify for FHA Loans with 10% down payment
  • FHA does not require borrowers to pay off outstanding collection and charge off accounts to qualify for FHA Loans
  • FHA does require timely payments for past 12 months on credit tradelines reporting on credit report
  • Borrowers can still get an approve/eligible per Automated Underwriting System FINDINGS with one or two late payments in past 12 months

Qualifying For FHA Loans After Bankruptcy And Foreclosure

FHA home buyers can qualify for FHA Loans after Bankruptcy and Foreclosure.

Here are the requirements to qualify for FHA Loans after bankruptcy and foreclosure with Gustan Cho Associates:

  • 2 year waiting period to qualify for FHA Loans after Chapter 7 Bankruptcy
  • No waiting period to qualify for FHA Loans after Chapter 13 Bankruptcy discharged date
  • No waiting period to qualify for FHA Loans after Chapter 13 Bankruptcy dismissal date
  • Home buyers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • Three year waiting period to qualify for FHA Loans after short sale and recorded date of foreclosure and/or deed in lieu of foreclosure.
  • Lenders do not want to see any late payments by borrowers after bankruptcy and/or foreclosure.
  • The Gustan Cho Team allows late payments after bankruptcy and/or foreclosure if borrower gets an approve/eligible per Automated Underwriting System FINDINGS.

Home buyers who have lower credit scores or bad credit can contact me at 800-900-8569 or text me on my cell at 262-716-8151 for faster response to get qualified for a home loan. We are available 7 days a week, evenings, weekends, and holidays to take your call or email us at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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