FHA Loans With High DTI & Low Credit Scores Florida
This BLOG On FHA Loans With High DTI & Low Credit Scores Was Updated On June 19, 2017
Not all FHA Lenders have the same FHA Loans With High DTI and Credit Score Requirements.
There are two types of mortgage lending guidelines:
- HUD Guidelines
- FHA Lender Overlays
The Gustan Cho Team are specialists in helping home loan borrowers secure FHA Loans With High DTI and Lower Credit Scores.
- There are many home buyers with prior bad credit, lower credit scores, and higher debt to income ratios who are told they do not qualify for FHA Loans due to lender overlays where in fact they do qualify.
- HUD (The U.S. Department of Housing & Urban Development) is the parent of FHA (Federal Housing Administration).
FHA Minimum Credit Score & DTI Requirements
Every loan program has a minimum credit score requirement.
- Borrowers who have a minimum of a 580 credit score can qualify for a FHA Mortgage Loan with 3.5% down payment.
- Most FHA mortgage lenders require a minimum credit score of 640 FICO while a select few might have a 620 minimum credit score requirement.
- Higher than 580 credit score requirement is not a HUD Guidelines but rather FHA Lender Overlays.
- FHA Lender Overlays are mortgage requirements that the FHA Lender imposes on top of the minimum credit scores required by HUD.
- A mortgage loan borrower can also have open collection accounts that does not need to be paid off.
- Most FHA Mortgage Lenders will most likely want you to pay off collection and judgments as well as have a minimum credit score of 640.
- We do have restriction on judgments.
- I can finance you with an outstanding judgment, however, you would need to have a payment plan into effect. I
- t does not matter how much your payment is.
- It can be as little a $20.00 per month on a million dollar outstanding judgment but there has to be an agreed payment plan.
- The 3.5% down payment can be gifted by a family member and the seller can contribute up to 6% of the closing costs.
VA Minimum Credit Score & DTI Requirements
- The Department of Veteran Affairs (VA) is the government agency that insures and guarantees VA Loans.
- VA does not have a minimum credit score requirement but most VA Lenders have lender overlays on credit scores of 580 FICO.
Fannie Mae & Freddie Mac Minimum Credit Score & DTI Requirements
Fannie Mae and Freddie Mac are the two mortgage giants that sets standards for Conventional Loans. Conventional Loans are called conforming loans because they need to conform to Fannie/Freddie Mortgage Guidelines.
Here are the basic Conventional Credit Score and Debt To Income Ratio Requirements:
- Minimum credit scores to qualify for Conventional Loans is 620.
- Maximum debt to income ratio requirements to get an approve/eligible per Automated Underwriting System is 45% DTI for Fannie Mae.
- Maximum debt to income ratio requirements to get an approve/eligible per Automated Underwriting System is 50% DTI for Freddie Mac.
Home Buyers With Lower Credit Scores
Home buyers with lower credit scores can qualify for FHA Loans as long as they get an approve/eligible per Automated Underwriting System (AUS):
- Home buyers with 500 to 579 credit scores can qualify for FHA Loans with 10% down payment.
- Need to get an approve/eligible per Automated Underwriting System.
- Compensating Factors required.
- Need to have been timely on all payments for past 12 months.
Sellers Concessions And Lender Credit For Closing Costs
Home buyers can pay closing costs with sellers concessions and/or lender credit.
- Lender Credit is when the mortgage lender will cover part or all of the closing cost in lieu of a higher mortgage interest rate.
- Sellers can pay for buyers closing costs, taxes, insurance, and mortgage insurance premium.
- The maximum seller contribution is a 6% seller contribution on FHA Loans.
- The down payment on a home purchase can be gifted on FHA Loans.
- Donor of down payment should be family member or good friend who has known borrower for at least 5 years.
- The earnest money can be used for down payment can be used towards the home purchase.
Home buyers and mortgage borrowers with any questions can contact us anytime at 800-900-8569 or by email us at firstname.lastname@example.org and/or text or call me at 262-716-8151. We are available 7 days a week, evenings, weekends, and holidays.