Credit In Mortgage Process: Credit Scores Versus Credit Report

This Article Is About Credit In Mortgage Process: Credit Scores Versus Credit Report

Credit In Mortgage Process is probably one of the most important factors when it comes to residential home mortgages.  There are two ways mortgage lenders view credit:

  • Borrowers need to meet minimum credit score requirements
  • The minimum credit score requirement is different depending on the individual loan program
  • Mortgage Lenders will review the overall payment history listed on the credit report
  • Special emphasis will be placed on payment history for the past 12 months
  • Special emphasis will be placed on late payments after bankruptcy, deed in lieu of foreclosure, foreclosure, short sale

Government and conventional loans have their individual minimum credit score requirement. However, each lender can have its own lending guidelines which are called lender overlays. Lender overlays are higher lending guidelines by individual lenders that are above and beyond the minimum agency guidelines of HUD, VA, USDA, Fannie Mae, and Freddie Mac.

Minimum Credit Score On Government And Conventional Loans

To qualify for a 3.5% down payment home purchase FHA loan, the borrower needs a 580 credit score. Borrowers with under a 580 FICO and down to a 500 credit score need to put a 10% down payment. VA loans do not have a minimum credit score requirement or a maximum debt to income ratio cap. This holds true if the borrower can get an approve/eligible per automated underwriting system.  USDA loans normally require a 580 credit score. Fannie Mae and Freddie Mac require a 620 credit score on conventional loans.

Credit Scores Versus Credit Report

Mortgage Loan Applicant’s credit scores are what decides whether they qualify for a mortgage loan. Credit Scores are also what determine rates and terms. There are pricing adjustments on mortgage interest rates depending on the borrower’s credit scores. Also, the debt to income ratio will be restricted to a 43% debt to income ratio versus a 46.9% front-end DTI and 56.9% DTI if credit scores are below 620 FICO with FHA loans. Borrowers with credit scores 620 FICO or higher,  debt to income ratio limit increases to 46.9%/56.9%. Having a clean credit report and maximizing credit scores is the most important factor when it comes to qualifying for a mortgage loan.

Most homebuyers who consult mortgage brokers are told that they need to repair their credit first before the mortgage broker will be able to help them. People need to educate themselves about credit, credit repair, credit scores, rebuilding credit, and credit reporting agencies. We highly recommend that you visit us and check out what will be the largest most informative credit repair website.  It has just launched and work is in progress but it will explain all about credit and the importance of credit repair and rebuilding your credit.

Disputing Credit During Mortgage Process

Disputing Credit During Mortgage Process

Borrowers with bad credit can hire a credit repair company or repair credit on their own. One important note mortgage borrowers need to realize is that they cannot have credit disputes during the mortgage process. There are exemptions on credit disputes. Medical Credit Disputes are exempt. Non-Medical Disputes with over $1,000 in disputes need to be retracted or downgraded to manual underwriting. Non-Medical Collections with zero balances are exempt from disputes. Charge Offs cannot have credit disputes.

For more informational articles on credit repair and the importance of credit during the mortgage process, visit us at Rebuilding Your Credit.

Credit Fix Advisors is a credit and mortgage informational site where consumers can get free information on re-building credit to qualify for mortgages. There are blogs that will explain how to repair your own credit.

Secured Credit Cards

The best way to re-establish credit after a bankruptcy or foreclosure is by getting secured credit cards. Secured credit cards are the easiest and fastest way to increase credit scores and start re-establishing credit. The ideal amount of secured credit cards to get is 3 with at least a $500 credit limit. Depending on how bad the credit report is, each secured credit card can increase credit scores by 20 or more points. Consumers can get secured credit cards that report to all three major credit reporting agencies.

Potential homebuyers who have the income but do not meet the credit in the mortgage process and need help in qualifying for a home loan, please contact Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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