How To Prepare Your Credit Scores For Home Purchase

Advice On How To Prepare Your Credit Scores For Home Purchase

If you are a home buyer and plan on buying a home in the near future, you should prepare your credit scores for home purchase. Credit Scores is what determines whether or not you qualify for a home loan. Every mortgage loan program has minimum credit score requirements to qualify for home loans. For example, FHA Loans, Conventional Loans, USDA Loans, VA Loans, and Jumbo Loans all have their own minimum credit score guidelines. FHA Loans minimum credit score requirements to qualify for a 3.5% down payment home purchase loan is 580 FICO credit scores. Fannie Mae and Freddie Mac are the two mortgage giants that set conforming lending guidelines on conventional loans. Minimum credit score requirements for conventional loans is 620 FICO, which is substantially higher than FHA Loans. USDA Loans require a 640 FICO credit score from its borrowers. Most VA Loan programs require a 580 FICO credit score, although there are VA mortgage lenders that will qualify and approve VA mortgage loan borrowers with credit scores of under 580 FICO. Most Jumbo Mortgage Lenders require a 700 FICO credit score minimum, although there are a few Jumbo Lenders that will go below the 700 FICO credit scores. Condotel and Non-Warrantable Condo Financing requires a minimum credit score of 680 FICO credit scores.

Prepare Your Credit Scores For Home Purchase And Refinance

Another reason for you to prepare your credit scores for home purchase and refinance is because the biggest factor that determine mortgage rates are credit scores. Credit scores is by far the single most biggest factor in determining what mortgage rates you get. There are other factors that determine your mortgage interest rates, however, your credit scores is the leading indicator on the risk level the mortgage lender judges on every single mortgage loan borrower. Lower credit scores means higher risk. On conventional loans, to get the best mortgage rates on conventional loans, the borrower needs a credit score of over 740 FICO. There are pricing adjustments on every 20 FICO point drop of credit scores. As an example, a conventional mortgage loan borrower with a 740 FICO credit score may get quoted a mortgage interest rate of 4.0% where a borrower with a 680 FICO Credit Score may get quoted a rate of 4.5% mortgage rates. FHA Loans are not as credit score sensitive like conventional loans but lower credit scores on FHA Loan applicants means higher mortgage rates. If your credit scores are higher than 640 FICO, you will most likely get the most competitive FHA mortgage interest rates. Pricing hits on FHA Loans are extremely severe if your credit scores drop below 600 FICO. On a recent example, a borrower with a 680 FICO credit score got quoted a 3.875% FHA mortgage interest rate where another FHA mortgage loan borrower with a 581 FICO credit score got quoted a FHA mortgage interest rate of 4.75%. Refinance mortgage loan borrowers should do all they can to get their credit scores as high as they could to get the best possible mortgage interest rates.

Tips On How To Prepare Your Credit Scores For Home Purchase

There are some quick fixes in boosting and maximizing your credit scores. If you are planning on buying a new home in the very near future or planning on refinancing your home loan, consult with a loan officer. Your loan officer will pull your credit and can advise you on how to maximize your credit scores. Paying down your credit card balances is one way of instantly increasing your credit scores. If you have no active credit tradelines , try getting several secured credit cards which will definitely boost your credit scores by at least 20 FICO points per secured credit card. Never be late on any of your monthly payments. One 30 day late payment will definitely plummet your credit scores. Do not pay off any older collection accounts. You can qualify for a FHA Loan with collection accounts with outstanding collection balances. If you pay your old collection accounts, it will re-activate the statute of limitations and will trigger a current late payment on a dormant collection account which will drop your credit scores. If you have lower credit scores, do not apply for new credit because every hard credit inquiry will drop your credit scores by two or more FICO points. Chances are that you will not get an unsecured credit card approval if your credit scores are under 700 FICO.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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