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Credit Scores And Mortgage Rates Versus Pricing Adjustments

Credit Scores And Mortgage Rates Versus Pricing Adjustments

This BLOG On Credit Scores And Mortgage Rates Versus Pricing Adjustments Was UPDATED On January 2nd, 2019

Impact Of Credit Scores And Mortgage Rates:

Credit Scores And Mortgage Rates go side by side.

  • The most important factor in any mortgage loan application process is one’s credit scores
  • Although income, credit, credit history, debts, assets, and liabilities are all important in the mortgage loan application process, the single most important factor in a mortgage loan application process is a borrower’s credit scores next to qualified income

Credit Scores And Mortgage Rates: Credit Scores Determines Whether You Qualify For A Certain Loan Program

Credit scores is the deciding factor in what credit tier a borrower qualifies for.  For example, to qualify for a FHA loan, you need a minimum credit score of 500 FICO.

  • For those borrowers with credit scores between 500 and 579 FICO, they need a minimum 10% down payment in order to qualify for FHA Loans
  • Home Buyers who only want to put down 3.5% down payment on a home purchase, they need a credit score of 580 FICO or higher
  • Borrowers with credit scores of 579 FICO would not qualify for a 3.5% down payment mortgage loan
  • They would only qualify for a 10% down payment FHA loan
  • That 1 point difference would require borrowers for the higher down payment

What Are Minimum Credit Scores For Conventional Loan?

Credit scores are critical for those who want to qualify for conventional mortgage loans.

  • Most lenders have minimum credit scores requirement for conventional mortgage loan programs
  • Minimum credit scores required for most conventional mortgage loan programs for most mortgage lenders are 640 FICO
  • A 640 FICO credit score is considered poor for conventional mortgage loans
  • Most borrowers with credit scores of 640 FICO will probably get less than favorable mortgage rates

Credit Scores And Mortgage Rates And Loan Programs

To qualify for a conventional mortgage loan requiring a 5% down payment, most mortgage lenders require credit scores of 640 FICO.

  • To qualify for conventional loans requiring a minimum 3% down payment, most lenders require credit scores of 680 FICO or higher
  • To qualify for jumbo loans, most portfolio jumbo lenders require credit scores of 720 FICO or higher, while other lenders require credit scores of 740 FICO or higher
  • Condotel lenders require minimum credit scores of at least 680 FICO

Lender’s Overlays With Credit Scores And Mortgage Rates

The minimum credit score required for a FHA mortgage loan is 500 FICO.

  • However, most lenders have their own overlays. 
  • A lender’s overlay is the lender’s own lending criteria surpassing the minimum FHA guidelines
  • Just because you got an automated approval by Fannie Mae’s Automated Underwriting System does not mean that you are guaranteed a mortgage loan
  • The lender has their own lending criteria which is above and beyond Fannie Mae’s guidelines
  • For example, many lenders has their own FHA lending overlays when it comes to minimum credit scores
  • Although the minimum credit scores FHA requires is 500 FICO, there are many lenders who set they credit scores overlays at a 640 FICO minimum

Need To Monitor Credit Scores

Lower credit scores mean higher cost for mortgages, insurance, credit cards, and installment loans.

  • Borrowers need to monitor your credit report regularly and see that there are no errors on their credit report
  • One late payment on a monthly revolving or installment account can drop credit scores by 80 points or more

Home Loan With Low Credit Scores

As long as you can provide proof of income, you can get a mortgage loan as long as your credit scores are above 500 FICO and you get an automated approval by Fannie Mae’s Automated Underwriting System or via a manual underwrite.

I specialize in helping folks with prior bad credit or lower credit scores and work with dozens of wholesale lenders who do not have overlays.  Home buyers have lower credit scores or have had prior credit problems, please contact me at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. Or visit us at www.gustancho.com .  I am confident I will be able to get you get a residential mortgage loan approval.

Gustan Cho NMLS ID # 873293

Related> Improving Credit Scores To Qualify For Mortgage

Related> FHA Guidelines On Minimum Credit Scores

Related> How Can I Improve Low Credit Scores

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