Gustan Cho The Mortgage Expert,
Publish On: January 22, 2021
This Article Is About Credit Scores And Mortgage Rates Versus Pricing Adjustments
Credit Scores And Mortgage Rates go side by side. The most important factor in any mortgage loan application process is one’s credit score. Although income, credit, credit history, debts, assets, and liabilities are all important in the mortgage loan application process, the single most important factor in a mortgage loan application process is a borrower’s credit scores next to qualified income.
Credit Scores And Mortgage Rates: Credit Scores Determines Whether You Qualify For A Certain Loan Program
Credit scores are the deciding factor in what credit tier a borrower qualifies for. For example, to qualify for an FHA loan, you need a minimum credit score of 500 FICO. For those borrowers with credit scores between 500 and 579 FICO, they need a minimum 10% down payment in order to qualify for FHA Loans. Home Buyers who only want to put a 3.5% down payment on a home purchase, need a credit score of 580 FICO or higher. Borrowers with credit scores of 579 FICO would not qualify for a 3.5% down payment mortgage loan. They would only qualify for a 10% down payment FHA loan. That 1 point difference would require borrowers for the higher down payment.
What Are Minimum Credit Scores For Conventional Loan?
Credit scores are critical for those who want to qualify for conventional mortgage loans. Most lenders have minimum credit scores required for conventional mortgage loan programs. The minimum credit scores required for most conventional mortgage loan programs for most mortgage lenders are 640 FICO. A 640 FICO credit score is considered poor for conventional mortgage loans. Most borrowers with credit scores of 640 FICO will probably get less than favorable mortgage rates.
Credit Scores And Mortgage Rates And Loan Programs
To qualify for a conventional mortgage loan requiring a 5% down payment, most mortgage lenders require credit scores of 640 FICO. To qualify for conventional loans requiring a minimum 3% down payment, most lenders require credit scores of 680 FICO or higher. To qualify for jumbo loans, most portfolio jumbo lenders require credit scores of 720 FICO or higher, while other lenders require credit scores of 740 FICO or higher. Condotel lenders require minimum credit scores of at least 680 FICO.
Lender’s Overlays With Credit Scores And Mortgage Rates
The minimum credit score required for an FHA mortgage loan is 500 FICO. However, most lenders have their own overlays. A lender’s overlay is the lender’s own lending criteria surpassing the minimum FHA guidelines. Just because you got an automated approval by Fannie Mae’s Automated Underwriting System does not mean that you are guaranteed a mortgage loan. The lender has its own lending criteria which are above and beyond Fannie Mae’s guidelines. For example, many lenders have their own FHA lending overlays when it comes to minimum credit scores. Although the minimum credit score FHA requires is 500 FICO, there are many lenders who set their credit scores overlays at a 640 FICO minimum.
Need To Monitor Credit Scores
Lower credit scores mean higher costs for mortgages, insurance, credit cards, and installment loans. Borrowers need to monitor your credit report regularly and see that there are no errors on their credit report. One late payment on a monthly revolving or installment account can drop credit scores by 80 points or more.
Home Loan With Low Credit Scores
As long as you can provide proof of income, you can get a mortgage loan as long as your credit scores are above 500 FICO and you get an automated approval by Fannie Mae’s Automated Underwriting System or via a manual underwrite.
I specialize in helping folks with prior bad credit or lower credit scores and work with dozens of wholesale lenders who do not have overlays. Homebuyers have lower credit scores or have had prior credit problems, please contact me at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Or visit us at www.gustancho.com. I am confident I will be able to get you to get a residential mortgage loan approval.
Related> Improving Credit Scores To Qualify For Mortgage
