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Minimum Credit Scores- MINIMUMCREDITSCORES.COM

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MINIMUMCREDITSCORES.COM
LENDER HOTLINE: 888-581-5008

Credit Score Requirements for Home Loan Programs
The largest concern most people have when looking to purchase a home is what program they will qualify for given their credit score. It is no secret that credit has been given a very important role in the application of any financial product, but when it comes to the mortgage, it is essential. Not every program has a cut and dry minimum credit score, but the guidelines are easy enough to understand to help you figure out just where you are going to end up in your quest to become a homeowner. As you navigate the world of mortgages, you will see that there are many different types of programs to choose from aside from the varying interest rates and fees that pop up. Among the most common mortgage programs are conventional loans, subprime loans, FHA, and VA loans.

Credit Score Guidelines for Conventional Residential Mortgages

The most popular and typically most sought after loan is the conventional loan and with good reason. This loan offers you the ability to have access to the lowest rates and fees as well as the best terms. Conventional loans, however, are reserved for those with the best credit score and credit history. It is also reserved for those that are going to put money down on the home as the highest program conventional loans offer is the Conventional 97, which as the name suggests, requires a 3% down payment. Because these programs offer the lowest rates and most reasonable fees, they also have the highest credit score minimums in order to qualify for the program. In general to qualify for a conforming loan, your credit should fall into one of the following categories:

Greater than 75% LTV and No Monthly Reserves

With a debt ratio less than 36%, the minimum credit score is 680
With a debt ratio greater than 36% and less than 45%, the minimum credit score is 700
Greater than 75% LTV and 6 Months of Reserves

With a debt ratio less than 36%, the minimum credit score is 660
Greater than 75% LTV and 2 Months of Reserves

With a debt ratio greater than 36% and less than 45%, the minimum credit score is 680
Less than 75% LTV and 2 Months of Reserves

With a debt ratio greater than 36% and less than 45%, the minimum credit score is 620
These figures are all based on a primary residence. If you are purchasing a second home, such as a vacation home or an investment home that you are going to rent out or sell after fixing it up, the credit score minimums differ slightly, although the remaining stipulations remain the same.
Conventional Mortgage Qualifications for Second Homes

Greater than 75% LTV with 2 Months of Reserves

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Minimum Credit Scores- MINIMUMCREDITSCORES.COM

  1. 1. Minimum Credit Scores MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  2. 2. Credit Score Requirements for Home Loan Programs The largest concern most people have when looking to purchase a home is what program they will qualify for given their credit score. It is no secret that credit has been given a very important role in the application of any financial product, but when it comes to the mortgage, it is essential. Not every program has a cut and dry minimum credit score, but the guidelines are easy enough to understand to help you figure out just where you are going to end up in your quest to become a homeowner. As you navigate the world of mortgages, you will see that there are many different types of programs to choose from aside from the varying interest rates and fees that pop up. Among the most common mortgage programs are conventional loans, subprime loans, FHA, and VA loans. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  3. 3. Credit Score Guidelines for Conventional Residential Mortgages The most popular and typically most sought after loan is the conventional loan and with good reason. This loan offers you the ability to have access to the lowest rates and fees as well as the best terms. Conventional loans, however, are reserved for those with the best credit score and credit history. It is also reserved for those that are going to put money down on the home as the highest program conventional loans offer is the Conventional 97, which as the name suggests, requires a 3% down payment. Because these programs offer the lowest rates and most reasonable fees, they also have the highest credit score minimums in order to qualify for the program. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  4. 4. In general to qualify for a conforming loan, your credit should fall into one of the following categories: Greater than 75% LTV and No Monthly Reserves With a debt ratio less than 36%, the minimum credit score is 680 With a debt ratio greater than 36% and less than 45%, the minimum credit score is 700 Greater than 75% LTV and 6 Months of Reserves With a debt ratio less than 36%, the minimum credit score is 660 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  5. 5. Greater than 75% LTV and 2 Months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 680 Less than 75% LTV and 2 Months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 620 These figures are all based on a primary residence. If you are purchasing a second home, such as a vacation home or an investment home that you are going to rent out or sell after fixing it up, the credit score minimums differ slightly, although the remaining stipulations remain the same. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  6. 6. Conventional Mortgage Qualifications for Second Homes Greater than 75% LTV with 2 Months of Reserves With a debt ratio less than 36%, the minimum credit score is 680 With a debt ratio greater than 36% and less than 45%, the minimum credit score is 700 Greater than 75% LTV with 12 Months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 680 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  7. 7. Less than 75% LTV with 2 Months of Reserves With a debt ratio less than 36%, the minimum credit score is 640 With a debt ratio greater than 36% and less than 45%, the minimum credit score is 660 Less than 75% LTV with 12 months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 640 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  8. 8. Investment Home Conventional Guidelines Greater than 75% LTV with 6 Months of Reserves With a debt ratio less than 36%, the minimum credit score is 680 With a debt ratio greater than 36% and less than 45%, the minimum credit score is 700 Greater than 75% LTV with 12 Months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 680 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  9. 9. Less than 75% LTV with 6 Months of Reserves With a debt ratio less than 36%, the minimum credit score is 640 With a debt ratio greater than 36% and less than 45%, the minimum credit score is 660 Less than 75% LTV with 12 Months of Reserves With a debt ratio greater than 36% and less than 45%, the minimum credit score is 640 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  10. 10. As you can see, the credit score incrementally decreases as the compensating factors for the loan increase. The more reserves you have on hand, the lower the credit score requirements become. The same is true for the debt ratio – the lower the debt ratio, the lower the required credit score to qualify for a conventional mortgage. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  11. 11. FHA Mortgage Credit Score Requirements FHA mortgages used to be known as the first-time homebuyers mortgage, but today it is so much more. Anyone can obtain an FHA loan, whether they have owned a home before or not. As long as you meet the requirements, which are easier to qualify for than a conventional mortgage, you can be a good candidate for this loan program which is backed by the FHA. The thing to know about FHA mortgages is that it is not funded by the FHA, which means that the qualifications for each mortgage are generally set by the FHA as they will not back an unqualified loan, but the main requirements are set by the bank itself as they are the ones funding the loan and/or selling it on the secondary market. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  12. 12. The minimum credit score for FHA loans is twofold: if you want to be able to put down the minimum down payment of 3.5%, you will need a credit score that is higher than 580. If you have a score lower than 580, you may still be eligible for an FHA loan, however, you should expect to put down at least 10% on the home in order to obtain the loan. The lowest score that is allowed for an FHA loan even with a 10% down payment is 500. Any score lower than that will not be eligible for the FHA program. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  13. 13. Aside from the minimum credit score required by the FHA, is the importance of your credit history itself. In particular, the FHA is concerned with your housing history, whether it reports on your traditional credit report or you have a rental history. If you have any late payments in the last 12 months on your mortgage or rent, you will be ineligible for an FHA loan, regardless if you meet the minimum credit score requirements or not. The only exception to that rule is if you had any type of special circumstances, such as a serious illness or injury that made it impossible to work or your company closed and you lost your job. As long as you have recovered from the incident and have improved your credit history since then, the one-time late payment may be able to be overlooked. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  14. 14. VA Mortgage Credit Score Requirements VA mortgages are reserved for those that have served our country. The VA has specifications regarding the length of time you must serve in order to qualify, which you can find here. If you meet the requirements and are able to get your Certificate of Eligibility (COE), you then have to qualify for the loan with your financial credentials, which is very easy to do because the requirements are much more relaxed than conventional loans. VA loans, like FHA loans, are not funded by the government, but are rather backed by it. This means that they guarantee a portion of your loan should you default on it. This makes it easier for banks to provide funding to our veterans, even if they do not have very high qualifications for a loan. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  15. 15. As a general assumption, most lenders will not allow a VA loan with a credit score that is below 620. Of course, like any other loan, there are lenders that will take credit scores slightly lower as long as there are compensating factors and there are lenders that will require even higher credit scores to qualify. Because VA loans can offer up to 100% financing, it is a risky loan for the bank, which makes them a little pickier on who they provide funds to, but the guarantee from the government does help to offset that risk slightly. What VA lenders want is a financial picture that promotes security. They want a borrower that has a low debt ratio, reserves, and stable income. If that is the case and the credit score is slightly lower than that 620 minimum, they might grant an exception. On the other hand, a borrower with a low credit score, high debt ratio, no reserves, and a fairly new job will not represent a secure borrower and will likely not get approved despite the guarantee offered by the government. Every lender is different, so shopping around is crucial. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  16. 16. Subprime Loans for Bad Credit Borrowers Subprime loans used to have a bad rap – they were the loans that irresponsible people got when they were shopping for a home. They were also the loans that let people get away with no documentation and stated income. Today, subprime loans have a completely different reputation. They are harder to obtain and do not charge obnoxious fees or rates because they are regulated by the Ability to Repay Rule that governs every mortgage that is given to a borrower. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  17. 17. Today, subprime loans are affordable and do not provide you with terms that could harm you in the future. You will not be stuck with an interest only loan or a loan that has negative amortization. You will pay higher fees and a higher interest rate in exchange for the risk the lender is taking, but they will not be out of control. The lender for a subprime loan is looking for the same thing any other program would look for – they want to see financial security. If you need a subprime loan you obviously have a blemished credit history, but you have to show that you have turned your financial life around. You will have to provide explanations for the late payments reporting on your credit report or the bankruptcy/foreclosure you endured. Once you show that you have turned your financial life around, your credit score will not matter as much as it would for any other program. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  18. 18. Check your Credit Score and Choose the Right Mortgage Program You have many options when it comes to obtaining a mortgage today. The common denominator among all programs is the ability to prove that you can in fact afford the mortgage and are not being put under duress to afford it. Whether you take on an FHA, VA, subprime, or conventional loan, you will have to go through plenty of evaluation to ensure that it is the right decision for you right now. Sometimes a subprime loan is the better choice over an FHA loan because you will not have to pay mortgage insurance fees upfront or on a monthly basis. Other times, the FHA loan offers the best rate and payment that makes having a government backed loan the better choice. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  19. 19. The bottom line is that you need to shop around to determine which loan is right for you. Don’t just assume because your credit score is a certain number that you can only qualify for one loan type. You probably have options, and it is up to you to crunch the numbers to decide what is right for you right now as well as in the future. Remember that a mortgage is a large responsibility – one that you will likely carry with you for the next 15, 20, or 30 years. Make the right financial decision now to avoid remorse and financial difficulty in the future. MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  20. 20. T O L E A R N M O R E MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008 C L IC K HE R E MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  21. 21. Justin McHood is Americas Mortgage Commentator and has been providing Mortgage commentary for over 10 years. Mortgage Commentator INFORMATION PROVIDED BY: Justin McHood MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008
  22. 22. LEARN MORE ABOUT MORTGAGE COMMENTATOR: MORTGAGECOMMENTATOR.COM @MORTGAGECOM_ FACEBOOK.COM/MORTGAGECOMMENTATOR LENDER HOTLINE: 888-581-5008 MINIMUMCREDITSCORES.COM LENDER HOTLINE: 888-581-5008

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