Secured Credit Cards To Raise Credit Scores To Qualify For Mortgage

Secured Credit Cards To Raise Credit Scores To Qualify For Mortgage

This BLOG On Secured Credit Cards To Raise Credit Scores To Qualify For Mortgage Was UPDATED By On July 22, 2017

Getting Secured Credit Cards To Raise Credit Scores To Qualify For Mortgage is the fastest and easiest way for home buyers.

  • Many consumers who had a financial extenuating event such as bankruptcy or foreclosure often do not want to get into another situation where they spend more than they earn.
  • They often avoid getting new credit and want to pay everything with cash.
  • Nothing is wrong with this but it will not help them re-establish credit and will them when they apply for a home loan or other credit.
  • Even though they do not plan on using credit, they should get Secured Credit Cards To Raise Credit Scores and re-establish their credit.
  • Home buyers who are planning on qualifying for a mortgage loan need to realize that mortgage lenders have minimum credit score requirements.
  • Lenders also want to see seasoned established credit tradelines.

What Are Pricing Adjustments On Mortgage Interest Rates?

Mortgage Lenders have pricing adjustments based on mortgage borrower’s credit scores. Pricing Adjustments is when a mortgage lender hits a borrower due to a certain credit score.

Certain minimum thresholds are the following:

  • For example, to get the best mortgage rates on a 3.5% down payment FHA Loan, a borrower may need a 720 credit score.
  • Pricing adjustment thresholds may be 700 to 719, 680 to 699, 660 to 679, 640 to 659, 620 to 639.
  • There may be a large pricing adjustments for borrowers under 620 credit scores.
  • Lenders view lower credit scores as higher risk.
  • With higher risk, lenders charge higher mortgage rates.

Credit Scores Versus Down Payment & DTI On FHA Loans

With FHA Loans, FHA Mortgage Borrowers with under 580 credit scores require higher down payment than borrowers with higher than 580 scores. Credit Scores also have impact on debt to income ratio requirements with FHA Loans.

For example, borrowers with credit scores below 580 FICO need 10% down payment for a FHA insured mortgage loan. There is also a reduced debt to income ratio requirements with FHA Loans for borrowers with under 620 credit scores.

  • Any credit scores between 500 FICO and 580 FICO minimum down payment required is 10% down payment on FHA Loans. 
  • FHA borrowers with only a 3.5% down payment need a credit score of at least 580 FICO. 
  • However,  with a FICO credit score of 580 and 620, the maximum back end debt to income ratio cannot be greater than 43% . 
  • Mortgage Loan Borrowers with higher than 620 credit scores, the front end DTI cap is 46.9% and back end DTI is capped at 56.9% to get an approve/eligible per Automated Underwriting System (AUS).

Borderline Credit Scores And Qualifying For Loan Programs

FHA home buyers who do not have 10% down payment and only have 3.5% down payment on a home purchase would need a minimum of 580 credit scores. FHA Borrowers who have a credit score of 577 FICO but do not have the 10% down payment towards a home purchase would need a minimum credit score of 580 FICO.

  • The 580 mark is the minimum credit score needed to qualify for a 3.5% down payment home mortgage loan. 
  • With credit scores under 620, the maximum back end debt to income ratio allowed is 43% DTI to get an approve/eligible per AUS FINDINGS. 
  • If home buyer has debt to income ratio of 56.9%, the minimum credit score required is 620 FICO to get approve/eligible per AUS FINDINGS.

Paying Down Credit Card Balances & Secured Credit Cards To Raise Credit Scores To Qualify For Mortgage

There are ways of raising credit scores to qualify for mortgage. Credit Scores can fluctuate greatly month to month. If consumers max out credit cards, it can plummet credit scores. However, if they pay down their credit card balances to 10% of the credit limit, their credit scores will skyrocket. The fastest and easiest way to boost credit scores is by getting secured credit cards for those with a few or no revolving credit accounts.

  • Each secured credit card can boost credit scores by at least 20 or more points. 
  • Depending on credit profile, consumers can easily boost credit scores by 60 or more points by getting 3 secured credit cards. 
  • Most mortgage loan originators will recommend their mortgage loan borrowers who need credit score improvements to get secured credit cards.

Mortgage Borrowers who need credit advice or need to qualify with a lender with no lender overlays, please contact The Gustan Cho Team at 1-800-900-8569 or email us at gcho@gustancho.com.

Related> Secured Credit Cards

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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