Credit Scores Versus Credit History Mortgage Guidelines

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Credit Scores Versus Credit History Mortgage Guidelines

This BLOG On Credit Scores Versus Credit History Mortgage Guidelines Was UPDATED On October 10th, 2018

The Importance Of Mortgage Guidelines On Credit Scores Versus Credit History

One of the first questions mortgage loan borrowers ask mortgage lenders is what is the minimum credit scores to qualify for a home loan.

  • There are minimum credit score requirements to qualify for particular mortgage loan programs
  • For example, to qualify for a FHA Loan with a 3.5% down payment, the minimum credit scores required is 580 credit scores
  • Mortgage loan applicants can qualify for FHA Loans with credit scores of under 580 FICO credit scores
  • However, HUD, the parent of FHA, requires a 10% down payment on borrowers who have credit scores of under 580 FICO
  • Conventional Loans require a minimum credit score of 620 credit scores

HUD Versus Fannie Mae And Freddie Mac

Fannie Mae and Freddie Mac are the two mortgage giants in the United States that set the mortgage lending requirements for Conventional Loans:

  • The United States Department of Housing and Urban Development, known by many as HUD, is the parent of the Federal Housing Administration, or FHA
  • HUD is the governmental entity that sets credit score requirements and other Guidelines for FHA Loans
  • HUD does not originate nor fund FHA Loans
  • HUD main function is to insure FHA Loans that are originated and funded by approved banks and lenders FHA insures lenders in the event a borrower who has a FHA Loans defaults on their FHA Loans

Function And Role Of FHA

In order for FHA to insure the FHA approved bank and/or lender, lenders needs to make sure that every Home Loan they originate and fund meet FHA Guidelines :

  • This includes the minimum credit score requirements
  • One of the most important factors borrowers need to consider is lenders will not only look at the borrower’s credit scores but also the borrower’s overall credit history
  • Credit Scores Versus Credit History?
  • Both are extremely important
  • A borrower may meet the minimum credit score to qualify for a particular mortgage loan program
  • However, the credit history is carefully analyzed by mortgage underwriters

FHA Loans With Bad Credit

Most lenders do understand that a borrower can had periods of bad credit history due to periods of unemployment, loss of business, divorce, or medical issues:

  • However, having a bad or poor bad payment history while there are no extenuating circumstances poses questions
  • Mortgage underwriters will need to determine the reasoning why the borrower has had a poor credit payment history
  • One of the things that mortgage underwriters want to know is that the borrower is not financially irresponsible when it comes to paying their bills
  • This is because this will be an indication that the borrower will not be responsible in paying their future mortgage payments on time

Credit Scores Versus Credit History On Late Payments After Bankruptcy And Foreclosure

I get many calls and emails by mortgage loan applicants who were told by lenders that they do not qualify for a mortgage loan.

  • This is because they had late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
  • Late payments after bankruptcy, foreclosures, deed in lieu of foreclosure, and short sale is extremely viewed negatively by mortgage underwriters
  • It is true many lenders will not even look at borrowers who had even a single 30 day late payment after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
  • However, late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale is not a deal killer

Qualifying For Mortgage With Less Than Perfect Credit With Lender With No Overlays

I have helped countless of borrowers with late payments after a bankruptcy and foreclosure get a mortgage loan.

  • Many borrowers are shocked when they find out that they meet the minimum credit score requirements and meet the debt to income ratio requirements
  • But do not qualify for a mortgage loan just because they had late payments after a bankruptcy and/or foreclosure, deed in lieu of foreclosure, or short sale
  • A good letter of explanation will be required

Borrowers with late payments after a bankruptcy or foreclosure and cannot qualify at another mortgage lender, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com and I will be able to help you get qualified for a mortgage loan.

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