FHA credit scores to 600 – USDA credit scores to 600 – VA credit scores to 600
IMPORTANT information that you need to be aware of in regards to lower credit scores – 580 credit scores to 619 credit scores
Low Credit Scores - You hear so much talk still out on the street about some mortgage companies that can do low credit scores down to 500, to 550, and to 580. There are some very important tips and information that one should be extremely aware of when speaking to a loan officer that says they can do such scores. My advice is not based on assumptions, because I have literally spoken to borrowers myself in regards to what was promised them, and then the closing falls apart at the last minute. I am not saying that this happens all the time.
Why do these types of loans not make it to closing, even though the loan officer stated that they could do such scores and or made promises? It's a way to get you in the door, just like most sales. I have heard managers tell their loan officers to just bring the deal in now and that they will worry about the problems after the fact. Yes people, this does happen more than you would think. Integrity and professionalism is thrown right out the door.
I will sit here and tell you that any type of loan with a credit score lower than 620 will be harder to close. I get about 1 e-mail per week from a borrower that found me online, that tells me their story on how they were promised a loan with a credit score of 585. Just because the lender has that kind of mortgage program with a rate and underwriting guidelines, doesn't mean that it will close. I had a client several months ago who was told that they could get a mortgage with a 590 credit score and that it should not be a problem. I educated her in what had to be done in order to close. She later on received a call from her previous loan officer who changed his story on how it would be much harder to get this specific deal done.
My assumption is that she was slightly more educated in this department now and he had originally sold her on the "don't worry, shouldn't be a problem" tactics that many sales people use. Not all, but some sales people, even loan officers, don't want to lose you as a client. If someone made you feel that it was going to be difficult, that it would be hard and more expensive, that many borrowers would seek someone else until they found a better answer. Sorry borrowers, this is not a great way to shop for a mortgage.
In any case, here is an excerpt from a company that will allow borrowers to go down to a 580 credit score.
These mortgage requirements are for those with credit scores under 620. Now, at Infinity Home Mortgage Company, I can only go down to credit scores of 600. I will talk about this more later.
As you can see, the underwriting requirements are more strict when you have fico scores under 620. I have spoken to a few lenders that say that you can go down to a credit score of 550, but you would need 15 percent down. FHA just proposed this requirement, that you now need 10% or more down with a credit score less than 580. I have a good feeling that this will be a requirement by this summer.
My whole point to this is that many borrowers are explained or educated on the details/specifics when trying to obtain a mortgage with less than a 620 credit score. There is no guarantee to anything, especially when pertaining to mortgages in today's market.
Key Note – Most lenders won’t be able to underwrite a FHA loan with non-traditional credit. I can still do this myself. Non-traditional credit is such credit as cell phone payments, utility payments, day care payments, car insurance, etc, etc.
Credit scores down to 600 at Infinity Home Mortgage.
This is case-by-case, whether it's a FHA loan, a USDA loan, or a VA loan. (need a 620 or higher for conventional loans) We are looking for loans that make sense, just like the old days of FHA underwriting. You need to speak to a trusted mortgage professional that will educate you on the differences and explain to you that this won't be cheap. Just in general, you are looking at a pricing hit of about 2.5 points to 3.0 points additional just for credit scores down to 600 with our company. I priced this out with the other lender that I know that can do this and their pricing hits are about 3.25 points to 3.5 points. Just on a $200,000 mortgage, this could be an additional $5,000 to $6,000 more in costs. Or you could have a much higher interest rate which would raise your payment about $100 a month and that you still would have additional costs of $3,000 for added points.
Key Note – Most lenders that say they can do lower credit scores usually have to broker out your loan to a whole sale company that is set up to do these. Here at Infinity Home Mortgage Company, we actually underwrite these loans in-house. I would only have it this way because I would have full control over you loan then.
BUYER BEWARE – You just need to be careful on who you speak to and what kind of promises that one would make. There is so much misinformation out there for several reasons. Either the loan officer doesn’t know or they are just trying to get you into the door.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc