What Is The Minimum Credit Score To Qualify For Mortgage

This BLOG On What Is The Minimum Credit Score To Qualify For Mortgage Was Updated On May 14, 2017

It is not the end of the world for consumers with bad credit.

  • Millions of Americans had a point in their lives where they lost their jobs, had unexpected medical emergencies, or went through a divorce where their credit suffered. 
  • Unfortunately, credit can suffer in a matter of a few months. 
  • Unfortunately, repairing credit and improving credit scores takes patience and time.
  • With time, credit and credit scores will improve. 
  • Fortunately, there are ways to improve credit as long as consumers understand how it works.
  • Consumers do not have to hire an expensive credit repair company to repair credit and to improve credit scores.  
  • Consumers can improve credit scores and repair credit themselves but need to understand some credit repair basics.

Importance Of Credit Tradelines

Many people believe that closing old credit accounts will improve your credit scores.

  • This theory of closing out older credit tradelines is not true. 
  • Having a credit history is part of overall credit profile and affects credit scores. 
  • It is called credit seasoning. 
  • The more good credit history consumers have on overall credit record, the better credit score will be. 
  • Having more credit lines open shows strength and can offset a negative credit tradeline. 
  • Closing an aged open credit tradelines will hurt credit scores.

New Credit

Credit is very important. Consumers should have the following:

  • Three to five revolving credit accounts.
  • One to three installment accounts.

Having a variety of different types of credit creates a stronger credit profile.

  • Hard credit inquiries will be hurting credit score. 
  • These inquiries is called a hard credit pull and it stays on credit record for two years. 
  • Applying for a bunch of credit cards all at once will definitely hurt credit profile and credit score and alert potential lenders that something is wrong.
  • However, the drop in credit scores is temporary and will go back up in a few months.

Bad Credit On Credit Report

Do not worry too much about older derogatory items on credit report.

  • Older aged collection accounts, charge off accounts, and other derogatory credit items do not affect credit scores.
  • Bad credit items stay on credit report for 7 years but has little to no impact on the credit scoring model after it has been seasoned for two or more years.
  • Credit disputes are not allowed during the mortgage process (medical collection accounts are exempt from credit disputes).
  • All negative items, with the exception of bankruptcy, must be deleted by law after 7 years from credit report. 
  • Bankruptcies on your credit report for 10 years. 

Importance Of Re-Establishing Credit

Establishing new credit is what will really jump start credit scores after bankruptcy and/or foreclosure.

  • 3 secured credit cards with at least $500 credit limits is a great way to start re-establishing credit to qualify for mortgage.
  • Credit scores would probably increase close to 100 points in 3 to 6 months just from the 3 secured credit cards. 
  • Other types of credit like a car loan, payday loan, or department store credit card will boost and strengthen consumer credit profile.
  • Keep in mind that one late payment on a credit card, auto payment, or mortgage payment can drop credit scores by more than 50 points. 
  • Religiously make timely payments every month.
  • One late payment can plummet credit scores and stay on credit report for 7 years.
  • Check credit report at least once or more times a year for accuracy and make sure there are no errors.

Credit Score To Qualify For Mortgage

There Are Minimum Requirements On Credit Score To Qualify For Mortgage:

  • FHA requires 580 FICO to qualify for 3.5% down payment home purchase loans
  • Conventional Loans require 620 FICO 
  • VA Loans normally require 580 FICO 
  • USDA Loans require 640 FICO
  • Jumbo Mortgages require 680 FICO
  • The Gustan Cho Team have Alternative Financing for Jumbo Loans where we offer 600 FICO Jumbo Mortgages
  • Investment Property Loans require 660 FICO

Condotel And Non-Warrantable Condo Requirement On Credit Score To Qualify For Mortgage

  • Mortgage lenders will charge a higher rate if your credit scores are low. 
  • Some mortgage lenders have credit score cutoff limits. 
  • For example, I specialize in Non-Warrantable Condominium and Condo Hotel mortgage loans. 
  • My portfolio investor of condotel and non-warrantable condo has a minimum credit score requirement of 680. 
  • It does not matter whether a buyer will be putting a 50% downpayment on Condotel purchase or whether they have millions of dollars in the bank but the credit score requirement cannot be negotiated.
  • If credit score falls below 680 FICO, borrower will not qualify for a Condo Hotel Mortgage Loan. 
  • What do I do when someone does not qualify for a Condo Hotel mortgage loan because their credit score is not 680 or higher? 
  • That is how important the credit score is when it comes to qualifying for not just a Condotel loan but for any mortgage.
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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