Question from Consumer:
"I am looking for some outside advice that will help me prepare and make suggestions to insure that my FHA mortgage gets approved at closing. I just went under contract and I am set to close on 4/25. I was given a good faith estimate and a pre-qualification, my middle score was 620. On Sat. I checked my scores and they all dropped 50 points or so, now 569 middle. I have no new credit, my debt ratio has shrunk; the only thing was 5 inquires the last 3 weeks for mortgages. (two should not be on, can get them removed). Now I am scared I will not close. Is there anything I can do to help my cause with the underwriter? Any thing I can suggest to my broker? I live in PA, going FHA, sellers assist and downpayment program. Does credit score matter for FHA? Can I offer a letter stating ,past credit mistakes (no major credit issues just short credit history). Any help would be great."
Response:
First as a consumer (mortgage credit applicant) you should be aware that the information contained in a RMCR (Residential Mortgage Credit Report) the type of credit report used by more than 95% of the industry is different than any type of CCR (Consumer Credit Report) the version of your credit report you will see if you request your own copy. As such the changes you see in a CCR may not necessarily be reflected in an RMCR. Note the qualifier...'May Not'.
In a normal circumstance the inquiries made while you shop for credit will affect your score and not only will the qualifying broker pull a credit report but the lending/closing institution may also pull their own credit report for this transaction. Keep in mind both of these are RMCR's and they should reflect a similar score if all factors were the same at the time if inquiry. If you shopped for any type of credit besides mortgage credit during this period or you continued to shop for mortgage credit beyond any 30 day period (for example if you started shopping for credit on the 20th of the month and continued to shop past the 20th of the next month) this will not be true.
FHA/HUD does not nor have they ever imposed a minimum credit score requirement. Investing lending institutions however in the current market have begun to impose their own minimum credit score requirements for FHA loans. It is possible that your credit decision could be affected by this change.
Here's what you need to do:
- Contact your mortgage broker and discuss the situation with them. Tell them when and from what source you received your credit report.
- Ask them to inquire about the status of any minimum credit score requirements on FHA loans with their investing lender.
- If minimum score requirements exist ask them what their strategy is in case the investing lender decides to pull a new credit report before closing and it reflects a score that is below the minimum.
Your broker will be able to provide you with all the insight as to the status of your file and inform you if this will truly turn into a problem. They should also be able to offer advice on what steps you may need to take to remedy the situation if it truly 'raises its head'.
Two things stand out to me in your inquiry:
- You stated that the score is now 569. If this score happens to show up on an RMCR depending on the lender you may still be eligible for approval. The two most consistent minimum score requirements for those investing lenders requiring at this time are 560 and 570. So there's about a 50/50 chance with your case if the investing lender even has a minimum score requirement.
- You stated that you have limited credit experience and since your application/pre-qualification that your debt ratio has shrunk. If this means that you have paid off or paid-down revolving credit since the application this is a material change to your credit history (especially if credit is limited) and can be the largest cause of your credit score declining.
Again the situation may never be revealed but your mortgage broker is the best source for direction in your case.
Best of luck to you and should you or your mortgage broker need any further assistance please feel free to contact us.
With regards,
Chaz Ramirez
DE Underwriter, Trainer, HUD Title II Application Consultant
http://activerain.com/chazramirez
Chaz Ramirez is a DE Underwriter, HUD Title II Mortgage Application Consultant, and a Trainer. For more information about me and my services please visit my ActiveRain profile.
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