How To Maximize Your Credit Scores To Qualify For FHA Loans

Maximizing Your Credit Scores Prior To Applying For A Mortgage Will Get You The Best Possible Rates

This article covers How To Maximize Your Credit Scores To Qualify For FHA Loans

Borrowers who do not meet the minimum credit score requirement to qualify for an FHA loan can try to boost their credit scores. The team at Gustan Cho Associates are experts in boosting credit scores. We are experts in helping borrowers maximize their credit scores so they can qualify for an FHA loan. The minimum credit score required to qualify for a 3.5% down payment FHA loan is 580 FICO. Borrowers can qualify for an FHA loan with under 580 credit scores and down to a 500 FICO. However, to qualify for an FHA loan with under 580 credit scores, you need a 10% versus a 3.5% down payment. In this article, we will discuss and cover how to maximize your credit scores to qualify for an FHA loan.

The Team At Gustan Cho Associates Can Help Borrowers Boost Their Credit Scores

Homebuyers do not need to go through credit repair to qualify for home loans. FHA Loans are the most popular mortgage loan program in the United States. HUD, the parent of FHA, sets the minimum mortgage guidelines for FHA Loans. HUD nor FHA do not originate nor fund FHA Loans. HUD’s role is to insure and guarantee FHA Loans originated and funded by private lenders in the event borrowers default on their home loans. In order for HUD to insure FHA Loans, lenders need to make sure that lenders follow FHA Guidelines with all of their borrowers. There are minimum credit score requirements to qualify for 3.5% down payment home purchases. FHA requires a 580 credit score. Borrowers with credit scores between 500 and 579 can qualify for FHA Loans with 10% down payment. There are ways to maximize your credit scores to qualify for FHA Loans.

Ways On How To Maximize Your Credit Scores

Credit scores can definitely be improved in a short period of time. Credit scores can fluctuate every month.

There are ways How To Maximize Your Credit Scores such as the following:

  • paying down credit cards to 10% of the credit limit
  • adding new credit such as secured credit cards
  • by being an authorized user on a family member and/or close friend’s credit cards

Importance Of Good Credit

Having a good credit score is not just a must-have in qualifying for FHA Loans but consumers will definitely save money on insurance premiums:

  • Good credit can also improve the chances of getting a new job or promotion
  • More and more employers are doing credit checks as part of their employment process
  • Those with derogatory credit or low credit scores may not meet the employer’s hiring requirement

Credit scores are often viewed by employers who consider candidates for job promotions.

Credit Scores And Mortgage Rates

Credit score ranges from a low to 300 to a high of 850:

  • To get the best possible mortgage rates, borrowers would need a credit score of 740
  • Many Jumbo Mortgage lenders have minimum credit score requirements of 700
  • However, to qualify for the best jumbo mortgage rates, the applicant needs a 740 credit scores

All lenders have minimum credit score requirements for loan programs.

Importance Of Credit Scores To Qualify For FHA Loans

What is the importance of a credit score to qualify for FHA loans

A consumer’s FICO credit score is made up of the following:

  • Payment History in credit report makes up 35% of the consumer’s overall credit score
  • Total Amounts Owed by the consumer makes up 30% of the overall credit score
  • Length of Credit History of the consumer makes up 15% of their overall scores
  • New Credit from the consumer makes up 10% of the consumer’s credit scores
  • Type of Credit the consumer uses makes up 10% of the consumer’s total credit scores

Don’t Pay Off Old Collection Accounts

Borrowers with older collection accounts, just leave them alone. Mortgage borrowers do not need credit repair to qualify for FHA Loans.

  • Any collection accounts with balances that are two years old or older hardly have an impact on credit scores
  • Consumers paying an older collection account a partial payment or payment will re-activate the old collection account
  • This will hurt consumers
  • Credit bureaus will treat this as if it were a new collection account
  • It will trigger a fresh derogatory negative item and can potentially drop credit scores
  • Homebuyers can qualify for a mortgage with open and unpaid collection accounts
  • Consumers who need to pay off an older collection account, do a pay for delete

Pay for delete is when consumers negotiate with the collection agency that they will have the derogatory item removed in lieu of a negotiated payment.

Judgments Need To Be Removed Or Settled

Borrowers cannot have an unsatisfied judgment on the credit reports and get qualified for a mortgage unless the judgment has been settled by an agreed settlement or a written signed payment agreement that has been in effect for at least three months.

  • Judgments are probably the worst derogatory item borrowers can possibly have on a credit report

The only way to rid judgment is in three ways:

  • paying off the judgment
  • settling with the judgment creditor
  • making a written payment agreement with the judgment creditor

Judgments can be paid at closing. However, mortgage underwriters need to see that borrowers have verified funds to cover the payment of judgment at closing. Borrowers can qualify for FHA Loans with tax liens as well. The same guidelines apply to outstanding tax liens as it does judgments.

Qualifying For FHA Loan With Lender With No Overlays

How to qualify for an FHA loan with a lender without overlays

Mike Gracz is the author of this blog on How To Maximize Your Credit Scores. Michael Gracz is a contributing editor with Gustan Cho Associates Mortgage News. Mike Gracz is also a senior mortgage banker and National Sales Manager with Gustan Cho Associates Mortgage Group. Mike is also an expert on GCA Mortgage News Forum and has a national reputation of being able to close FHA Loans other lenders can’t. This is due to Mike Gracz representing GCA Mortgage Group is a five-star nationally recognized mortgage company licensed in multiple states with no lender overlays on government and conventional loans. The team at Gustan Cho Associates can be reached at 262-716-8151 or text us for a faster response. Or email us at The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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