Credit Card Balances Impacts Credit Scores To Qualify For FHA Loans

This ARTICLE Is About Credit Card Balances Impacts Credit Scores

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, HUD requires a minimum 580 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 impact 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. Homebuyers can meet the minimum credit score requirements.

In this article, we will discuss and cover how high credit card balances lower credit scores and may disqualify borrowers from qualifying for a mortgage.

FHA Loans With Under 580 FICO And Bad Credit

Why credit card balances affect credit performance to qualify for FHA loans

FHA Loans are the best mortgage loan program for home buyers with bad credit and lower credit scores.

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

There are many cases where borrowers who fall just shy of the credit score minimum requirements of 580 FICO:

  • 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 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 by 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 software where it will state what borrower needs to do to maximize credit scores.

Paying Down Credit Card Balances Impacts Credit Scores Instantly

Does paying off credit card balances affect your credit results immediately

Maxed out credit card balances impact 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 balances below the 10% credit limit level to maximize their credit scores and qualify for FHA loans. For maximum effect, pay down all of your 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 the 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 than just paying down credit cards will boost your scores noticeably.

Advice On Improving Credit Scores To Qualify For Mortgage

Lenders have a credit score analyzing program, often called the 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 Card Balances Impacts Credit Scores In Qualifying For Mortgage

How to qualify for FHA mortgages after bankruptcy and exclusion

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:

  • Gustan Cho Associates 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 a 10% down payment
  • HUD does not require borrowers to pay off the outstanding collection and charge off accounts to qualify for FHA Loans
  • HUD does require timely payments for the past 12 months on credit tradelines reporting on a credit report

Borrowers can still get an approve/eligible per Automated Underwriting System FINDINGS with one or two late payments in the past 12 months.

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

Qualifying For FHA Mortgages 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
  • Homebuyers can qualify for FHA Loans one year into a Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • There is a three-year waiting period to qualify for FHA loans after a 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
  • Gustan Cho Associates allows late payments after bankruptcy and/or foreclosure if the borrower gets an approve/eligible per Automated Underwriting System FINDINGS

Homebuyers who have lower credit scores or bad credit can contact us at 262-716-8151 or text us for a 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 [email protected]

This BLOG On Credit Card Balances Impacts Credit Scores Was UPDATED On August 31st, 2021

Leave a comment