Credit Scores In Mortgage Application Process

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

Mortgage lenders will pull all three credit reports for every mortage loan applicant: Transunion, Experian, Equifax.  Each credit bureau will have a different credit score for the mortgage loan applicant.  The mortgage lender will use the middle credit score for mortgage qualification purposes.  For example, say a mortgage loan applicant has a 740 Transunion credit score, 640 Experian credit score, and a 540 Equifax credit scores.  The 640 Experian credit score will be used since the 640 credit score is the middle of the three credit scores.  If the mortgage loan applicant has a co-borrower, then the co-borrowers credit scores will be evaluated and the middle credit scores will be targeted.  Whoever has the lower middle credit score, that credit score will be used for mortgage qualification purposes.  Lets take an example.  Let’s say Michael Smith and Mary Smith are husband and wife and are mortgage loan applicants.  Michael Smith has a middle credit score of 640 and Mary Smith has a middle credit score fo 587.  Since Mary Smith has the lower of the two middle credit scores, Mary Smith’s middle credit scores will be used to qualify Michael and Mary Smith’s mortgage loan application.

Importance Of Credit Scores In Mortgage Application Process

Credit scores in mortgage application process is probably the second most important factor that is taken into consideration next to income by mortgage lenders.  Low credit scores in mortgage application process mean that you will not just pay higher rates but it is a factor which determines whether or not you qualify for a residential mortgage loan.  To qualify for a 3.5% down payment FHA insured residential mortgage loan, you need a minimum credit score in mortgage application process of 580 FICO.  The minimum credit score in mortgage application process to qualify for a conventional mortgage loan is 620 FICO.  To qualify for a condotel unit mortgage loan, the minimum credit score is 680 FICO.  Most jumbo mortgage lenders expect their jumbo mortgage loan applicants to have credit scores north of 700 FICO.  FHA rates for mortgage loan applicants with credit scores higher than 720 FICO is 3.75% where FHA rates for those with credit scores at 580 FICO can be as high as 5.625% depending on the wholesale mortgage lender.  Low credit scores means higher costs.  Many times, I need to help a home buyer with their credit issues prior to being able to proceed with processing and underwriting the mortgage loan application.

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

You cannot use an updated credit report with better scores during the mortgage application process.  Whatever credit report and credit scores that was initially pulled at the time you signed your mortgage loan applicantion, that credit score will be used until you close on your mortgage loan.  In the event if your credit scores have dramatically improved where it can make a major effect on you getting you a great mortgage rate, than your mortgage broker can cancel the mortgage loan application with the current wholesale mortgage lender and take your file to a different wholesale mortgage lender.

Gustan Cho

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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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