Home Mortgage Credit Score Requirements

Home Mortgage Credit Score Requirements And Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Home Mortgage Credit Score Requirements And Guidelines

If you are contemplating applying for a mortgage, there are some basic qualifications you need to be aware of. One of the main driving factors of mortgage qualifications is your credit score. A credit score is easy to damage and difficult to fix. In this blog we will detail the minimum Home Mortgage Credit Score Requirements And Guidelines for each type of mortgage product offered by Gustan Cho Associates. We will also go over a few tips on how to improve your credit before applying for a mortgage. Gustan Cho Associates are experts in mortgage lending. Gustan Cho Associates have helped numerous families with troubled credit achieve homeownership or refinance their current home. Our highly skilled Mortgage team are experts with lower credit score mortgage lending. Even if you have been turned down by a lender in the past, we encourage you to keep reading and reach out today.

Home Mortgage Credit Score Requirements Agency Guidelines

The history of credit scores can go back a long time. Not too long ago, a firm handshake was all that was needed to secure credit. Unfortunately, the days of the wild wild west are over. But this is a good thing for overall financial success. Credit scores came around in 1989. The invention of credit scores was put in place to create a standardized method of extending credit. Credit scores are designed to use calculations to remove prejudice from lending procedures and create equality. Some may argue that the invention of credit scores has created nothing but headaches. There are three main credit bureaus mortgage lenders use. They are Equifax, Experian, and TransUnion. These companies all use slightly different algorithms to calculate your credit score.  In the paragraphs below, we will discuss and cover the minimum credit score requirements per each mortgage agency.

HUD Agency Home Mortgage Credit Score Requirements And Guidelines On FHA Loans

Many lenders will tell you you need a 620 credit score to qualify for an FHA mortgage. While that may be true for their lending institution, that is not the FHA guideline and not what Gustan Cho Associates follow. In fact, you can get an FHA mortgage loan with a credit score as low as 500. If your credit score is between 500 and 579, you will need a minimum of a 10% down payment to qualify for FHA mortgage financing. If your credit score is 580 or above, you will only be required to put down 3.5% down payment. FHA mortgage lending is more forgiving with derogatory credit compared to conventional mortgage lending. Please read our blogs on FHA mortgage requirements for more information. 

VA Credit Score Requirements And Guidelines On VA Loans

If you are a veteran shopping for a home loan or doing some initial research into utilizing your VA mortgage benefits, you know that there is a lot of contradicting information available on the Internet. Many lenders will also tell you you need at least a 620 credit score to qualify for VA mortgage lending, but once again, this is not accurate. In fact VA mortgage lending does not have a credit score requirement. Any lender who tells you there is a credit score requirement for VA mortgage lending has a “credit score overlay”. Just because there is not a credit score requirement for VA mortgage lending does not mean you automatically qualify. There are strict payment history requirements surrounding VA mortgage lending. General rule of thumb is you need to have a clean 12 months on your credit report. This means no missed payments or no non-medical collections in the past 12 months. An underwriter may also verify you have made your housing payments (rent or mortgage) for up to 24 months. Being able to prove you make timely payments will help your VA mortgage qualifications

Fannie Mae And Freddie Mac Credit Score Requirements And Guidelines On Conventional Loans

Fannie Mae And Freddie Mac Credit Score Requirements Conventional Loans

The minimum qualifying credit score for a conventional mortgage loan is currently set at 620. Recently, Fannie Mae made a change where you can average the middle credit score for two borrowers in order to qualify for a conventional mortgage. We will dive into this in just a moment. With conventional mortgage lending, the credit criteria is a bit more strict compared to FHA or even VA financing. Just because you have a 620 credit score will not automatically qualify you for conventional mortgage lending. Conventional loans like to see at least a two-year payment history on multiple trade lines before qualifying. An automated underwriting system (AUS) will verify all information on your credit report, assets available, and work history, among other items.

The automated system will calculate your risk factors when qualifying for a mortgage. This highly tuned algorithm will let us know if you qualify for conventional mortgage lending. As stated above, the recent change with lower credit score individuals allowing you to average the two credit scores may help you qualify for a conventional mortgage loan. For example, if you have a 610 credit score and your spouse has a 650 credit score, then your cumulative credit score average is 630. You now qualify for a conventional mortgage based on your credit score (you must qualify on other conventional mortgage qualifications)

Credit Score Requirements On Renovation And Construction Loans

Renovation lending guidelines on credit scores:

Renovation lending such as FHA 203K and conventional products such as Fannie Mae home style and Freddie Mac Choice Renovation, do require a minimum qualifying credit score of 620. For more information on mortgage lending renovation, please call Mike Gracz at (800) 900-8569. Our highly skilled renovation team will be there to assist with your specific scenario. Renovation lending also follows all credit agency guidelines plus renovation requirements.

NON-QM Credit Score Requirements And Guidelines 

NON-QM mortgage products are great for credit challenged individuals or individuals who have significant derogatory credit events. An example of a significant derogatory credit event is a chapter 7 bankruptcy that is less than two years discharged. We have numerous specialty loan programs that have different qualifications compared to the mortgage products listed above. Many NON-QM mortgage programs allow lower credit scores. It is possible to get a jumbo loan even with a credit score of 600 while utilizing a NON-QM mortgage loan. The down payment requirements are definitely higher with lower credit scores. There are numerous different NON-QM mortgage products offered by Gustan Cho Associates. Please reach out to Mike Gracz on (800) 900-8569 to go over your specific NON-QM mortgage option.

Minimum Credit Score Requirements On Bad Credit Mortgages

Our team has seen every credit profile from down in the 400s all the way up to 850. We understand credit scores better than most mortgage lenders. This is why we specialize in lower credit score mortgage lending. If you have a copy of your credit report, our team will review that with you and give you pointers to raise your score. If you do not have a copy of your credit score, we can pull your report for you. Please note this will result in a hard inquiry on your credit report. Our team will give you tips and tricks to raise your credit score in a timely fashion. Depending on the severity of your credit report, this may be a longer process than you are prepared for. Some simple tricks such as lowering the utilization on your revolving credit accounts can dramatically increase your score. While we do not have a credit repair partner, we can give you free credit advice.

Gustan Cho Associates are mortgage experts and are available seven days a week. If you found the information above helpful, we encourage you to reach out to our team as soon as possible. You can call Mike Gracz directly on (800) 900-8569 or send an email to mike@gustancho.com. We work with first time homebuyers and experienced real estate investors. There are very few situations we have not come across and we are here to help you and your family. We look forward to helping you achieve your homeownership goals.

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