Credit Scores In Mortgage Application Process Versus Credit History

This BLOG On Credit Scores In Mortgage Application Process Versus Credit History Was UPDATED And PUBLISHED On May 26th, 2020

Credit Scores During Mortgage Process

Meeting credit score requirements is important but equally as important is the borrowers overall credit history. A 700 credit score mortgage borrower will not qualify for a mortgage if they had multiple recent late payments in the past 12 months. Borrowers who meet the minimum credit score requirement may qualify credit score-wise but the Automated Underwriting System (AUS) may not like the borrowers credit history.

Examples, where credit history comes into play where borrowers cannot get automated underwriting system approval, is the following cases:

  • Late Payments in the past 12 months
  • Late Payments after bankruptcy and/or housing event

In this article, we will discuss and cover Credit Scores In Mortgage Application Process Versus Credit History.

Which Credit Scores Do Lenders Use To Qualify

Which Credit Scores In Mortgage Application Process Will Mortgage Underwriters Use?

Mortgage lenders will pull all three credit reports for every borrower:

  1. Transunion
  2. Experian
  3. Equifax

Minimum Credit Score Mortgage Guidelines

58/5000 What are the guidelines for a minimum credit score

There are minimum credit score requirements to qualify for home loans. Each mortgage loan program has their own minimum credit score requirements. To qualify for FHA Loans with 3.5% down payment, borrowers need 580 credit scores. Fannie Mae and Freddie Mac require 620 credit scores.

  • Each credit bureau will have a different credit score for consumers
  • The mortgage lender will use the middle credit score as the qualifying score

For example:

Say a mortgage loan applicant has the following three mortgage scores:

  • 740 Transunion
  • 640 Experian
  • 540 Equifax

The 640 Experian credit score will be used

  • 640 credit score is the middle of the three credit scores
  • Borrowers with co-borrower, then the co-borrowers credit scores will be evaluated
  • The middle credit scores will be targeted

Whoever has the lower middle credit score, that score will be the qualifying score.

Case Scenario

Let’s take an example:

  • Let’s say Michael Smith and Mary Smith are husband and wife and need to qualify for a mortgage
  • Michael Smith has a middle credit score of 640 and Mary Smith has a middle credit score of 587

Since Mary Smith has the lower of the two middle credit score, Mary Smith’s middle credit scores will be used as the qualifying score.

Importance Of Credit Scores In Mortgage Application Process

What is the importance of credit results in the process of applying for a mortgage?

Credit scores in the mortgage application process are probably the second most important factor that is taken into consideration next to income by lenders.

  • Low credit scores in the mortgage application process mean borrowers will not just pay higher rates but it is a factor which determines whether or not they qualify
  • To qualify for a 3.5% down payment FHA loan, borrowers need a minimum credit score of 580
  • The minimum credit score to qualify for a conventional loan is 620
  • To qualify for a condotel unit loan, the minimum credit score is 680
  • Most jumbo lenders expect borrowers to have credit scores north of 700
  • FHA rates with credit scores higher scores are much lower than lower score borrowers
  • Credit scores at 580 will be higher than over 640 credit scores
  • Low credit scores mean higher costs

Many times, I need to help home buyers with their credit issues prior to being able to proceed with processing and underwriting their files.

If My Credit Scores In Mortgage Application Process Improve, Can I Use New Credit Scores?

Many lenders do not allow borrowers to use new updated improved credit scores during the mortgage process. There are many times where borrowers will get pre-approved with lenders but their credit scores improve. The Gustan Cho Team at Loan Cabin Inc. allows loan officers to use higher updated new credit scores for pricing and locking rated during the mortgage process. Unfortunately, there are lenders that do not allow this and whatever scores they were qualified with is the scores loan officers need to lock the rate:

Borrowers cannot use an updated credit report with better scores during the mortgage application process at some lenders:

  • Whatever credit report and credit scores that was initially pulled at the time they signed mortgage loan application, that credit score will be used until they close
  • In the event, if credit scores have dramatically improved where it can make a major effect on getting a great mortgage rate than loan officer can cancel the loan application with the current wholesale mortgage lender and take file to a different wholesale lender

The great news at the GCA Mortgage Group is that we can use higher credit scores of borrowers if their credit scores have improved without canceling the mortgage file. Borrowers who need to qualify for a mortgage with a direct lender with no mortgage overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at

Gustan Cho

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