2016 Mortgage Guidelines On Credit Scores Versus Credit History

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. FHA mortgage loan applicants can qualify for a FHA insured home mortgage loan with credit scores of under 580 FICO credit scores, however, FHA requires a 10% down payment on FHA borrowers who have credit scores of under 580 FICO credit scores. Conventional mortgage loan programs require a minimum credit score of 620 FICO credit scores. 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 FHA Guidelines for FHA Loans. FHA does not originate nor fund FHA Loans. FHA main function is to insure FHA Loans that are originated and funded by FHA approved banks and mortgage lenders in the event a borrower who has a FHA insured mortgage loan defaults on their FHA Loans. In order for FHA to insure the FHA approved bank and/or mortgage lender, the FHA approved mortgage lender needs to make sure that every FHA Loan they originate and fund meet FHA Guidelines which include the minimum credit score requirements. ¬†One of the most important factors mortgage borrowers need to consider is that mortgage 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. Most mortgage 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 and 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 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: Late Payments After Bankruptcy And Foreclosure

I get many calls and emails by mortgage loan applicants who were told by mortgage lenders that they do not qualify for a mortgage loan 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 lenders and it is true that many mortgage 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. I have helped countless of borrowers with late payments after a bankruptcy and foreclosure get a mortgage loan. Many mortgage 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. If you have late payments after a bankruptcy or foreclosure and cannot qualify at another mortgage lender, please contact me at 262-716-8151 or email me at gcho@gustancho.com and I will be able to help you get qualified for a mortgage loan.

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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