Tips Improving Credit Scores To Qualify For Mortgage


Tips Improving Credit Scores To Qualify For Mortgage

This BLOG On Tips Improving Credit Scores To Qualify For Mortgage Was UPDATED On March 4th, 2018

Mortgage Borrowers credit scores is the deciding factor on whether or not they qualify for a certain mortgage loan program and the determining factor with mortgage rates. Mortgage Rates function in two ways.

  1. Qualifying for mortgage loan
  2. Pricing mortgage interest rates

The higher borrower’s credit scores, the lower the mortgage rates. Especially with conventional loans.

  • With conventional loans, borrowers need a credit score of 740 or higher to get the best possible mortgage rates in the market
  • Mortgage rates will be higher with every 20 point drop on credit scores
  • This is especially on conforming loans
  • The breakdown on credit scores for conventional loans are
    • 760
    • 740
    • 720
    • 700
    • 680
    • 660
    • 640
    • and 620
  • Those in the 620 to 640 credit scores bracket will be paying the highest mortgage rates and possibly points on conforming loans
  • The bare minimum credit score to qualify for a conventional loan is 620
  • 620 credit score is considered a real bad credit score for a conventional loans
  • But home buyers can qualify for a conventional loan with a 620 score

Credit Score Requirements On Mortgage Programs

There are certain minimum credit scores requirements to qualify for the various residential mortgage loan programs.

  • For FHA loans, the minimum credit scores required to qualify for a 3.5% down payment FHA loan is 580
  • However, if credit scores are between 580 and 620 the maximum debt to income is capped at 43% debt to income ratios
  • If credit scores are at 620 or higher, debt to income ratio boosts up to 46.9% front end and 56.9% back end DTI to get an approve/eligible per Automated Underwriting System Approval
  • Sometimes it is worthwhile to try to improve credit scores prior to applying for a mortgage loan in order to get favorable debt to income ratio caps increased
  • Borrowers can qualify for a FHA loan with credit scores between 500 and 579 as long as they can put a 10% down payment on home purchase
  • If borrowers can only put a 3.5% down payment on home purchase via FHA loan, they need to improve credit scores to at least a 580

What Are Credit Scores Required On FHA 203k Loans

FHA 203K loans are aquisition and construction loans all in one.

  • FHA 203K loans require a minimum of 580 credit scores to qualify
  • Many FHA 203k Rehab Mortgage Lenders have overlays on credit scores with FHA 203k Loans
  • Most of them require a 640 credit score
  • However, The Gustan Cho Team at USA Mortgage is a direct lender on government and conventional loans with no mortgage overlays on FHA 203k Loans
  • The Gustan Cho Team at USA Mortgage only requires a 580 credit score on FHA 203k Home Rehab Loans

VA Home Loans

The Veterans Administration (VA) does not have a minimum credit score requirements on VA Home Loans.

  • However, most VA Lenders Has Overlays on credit scores on VA Home Loans
  • Most VA Lenders will require a 620 to 640 credit scores by veteran borrowers although VA does not have a minimum credit score requirement
  • The Gustan Cho Team at USA Mortgage has zero overlays on VA Loans.
  • However, compensating factors may be required
  • To get the best VA loan programs available where there are no overlays or rental verification required, one should have higher credit scores

USDA Mortgage Home Loans

USDA loans are an excellent mortgage loan program which offers 100% financing and requires no down payment on behalf of the home buyer.

  • There is a 2% funding fee of the loan amount which can be rolled into the mortgage loan amount
  • To qualify for USDA Loans, the mortgage loan applicant needs a 580 credit score and the property needs to be in a designated area deemed rural by the USDA and there is certain household maximum income requirements
  • The debt to income ratio is more strict that those of other residential mortgage loan programs
  • The front end debt to income ratios is normally capped at 29% debt to income ratio and the back end debt to income ratio is capped at 41% DTI.

Condotel Mortgage Loans

Condotel mortgage loans are portfolio mortgage loans and the minimum credit score required to qualify for condotel mortgage loans is 680.

Jumbo Loans

To qualify for Jumbo Loans, Jumbo mortgage lenders would like to see high credit scores from Jumbo mortgage loan borrowers.

  • Over 700 credit scores are normally required
  • However, lower credit scores mortgage loan borrowers can still qualify
  • To qualify for 90% loan to value jumbo mortgage loans, you need a minimum of a 740  credit scores

Commercial Loans

Most commercial mortgage lenders want to see their mortgage loan applicants to have a minimum 640 credit scores.

Non-QM And Bank Statement Mortgage Loans For Self Employed Borrowers

NON-QM Loans require a minimum of 640 credit scores for 20% down payment home purchase loans.

  • 660 credit scores requires 15% down payment. To qualify for 10% down payment non-qm loans, 680 credit scores are required
  • Bank Statement Mortgage Loans For Self Employed Borrowers require 620 credit scores with 20% down payment
  • To qualify for 10% down payment bank statement mortgage loans for self employed borrowers, 720 credit scores are required

Qualifying For Mortgage With Direct Lender With No Overlays

Home Buyers who need to qualify for mortgage with a national direct lender with no overlays on government and conventional loans can contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com. USA Mortgage has no lender overlays on FHA, VA, USDA, and Conventional Loans. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho


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