FHA Loans With High DTI & Low Credit Scores Florida
This BLOG On FHA Loans With High DTI & Low Credit Scores Was Updated On July 21st, 2019
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
Gustan Cho Associates Mortgage Group 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 an FHA loan with 3.5% down payment
- Most 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 Lender Overlays
- FHA Lender Overlays are mortgage requirements that a Lender imposes on top of the minimum credit scores required by HUD
- A borrower can also have open collection accounts that do not need to be paid off
- Most 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 a restriction on judgments
- I can finance you with outstanding judgment
- However, you would need to have a payment plan into effect
- It 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
- 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
- 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 set standards for Conventional Loans. Conventional Loans are called conforming loans. This is 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
Homebuyers with lower credit scores can qualify for FHA Loans as long as they get an approve/eligible per Automated Underwriting System (AUS):
- Homebuyers 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 the past 12 months
Sellers Concessions And Lender Credit For Closing Costs
Homebuyers can pay closing costs with sellers concessions and/or lender credit.
- Lender Credit is when the 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
- The donor of a down payment should be a family member or good friend who has known borrower for at least 5 years
- The earnest money can be used for the down payment can be used towards the home purchase
Homebuyers and mortgage borrowers with any questions can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.