You don’t need a 700 credit score & 20 percent down to buy a home – Credit Scores Part 1

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Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

asking about credit scores

Your credit scores are important. Credit sometimes seems easy, yet at times can seem so complicated and might not make sense why your scores might be lower.

One thing that I want to make clear is that you don’t need 700 credit scores and or 20 percent down to buy a home.

The mortgage industry has gone crazy lately, so you will hear a lot of chatter of misinformation out on the streets that you need excellent credit and a lot of money down. What is not explained is that there are mortgage programs that allow for less than perfect credit. One of the problems with this is that “less than perfect credit” has many definitions from so many in or out of the mortgage industry. You will see many ads on the internet telling you that you can get a FHA mortgage with “bad credit”, “less than perfect credit”, “no credit”, that they have “loans for people with bad credit”, and so much more. In some cases, it might get done, but you need to be very careful in who are speaking to and not get wrapped up in their ‘promises’ or ‘guarantees’.

 

So what are the minimum credit scores? Keeping in mind that many lenders have their own over-lays no matter what each agency below states.

Conventional Loans – You can’t go below a 620 credit score no matter what. And you need an automated approval in the system no matter what.

FHA Loans – The beauty about FHA loans is that they can be manually underwritten.  FHA says that they won’t insure a loan under a 500 credit score. Many lenders are raising their credit score minimum to 640. At Infinity Home Mortgage, we can still do credit scores from 600 to 639 with common sense underwriting, but the loan will have to make sense. And there are a few mortgage lenders out there that will go down to 580 credit scores. You just need to be very careful of their promises. Besides, anything below a 620, especially below 600, and your mortgage interest rate is going to be extremely high with higher closing costs. (so why not work on those credit scores)

VA loans – Many lenders have cut off scores of 640 or 620. The VA will possibly allow you to go down to a 580 credit score, even though they state that they have no minimum. But finding a lender or investor to do this might be extremely tough.

USDA loans – Many lenders have cut off scores of 640 or 620.

 

Loans for people with bad credit are in the past, but if you are working with a good loan officer, they can usually help you raise your scores in a specific period of time. But loans for people with less than perfect credit can still be done, depending on the actual credit score and when that consumer had their last rash of lates per se.

 

Key Reminder : I wanted to kill that rumor that you need 700 credit scores and or 20 percent down to buy a home. With a FHA loan, you can have as little as 3 1/2 percent down and a credit score of 620.

Key Reminder : Be careful of those lenders that can do your credit scores below 620 with a much higher rate, who tell you not to worry because you can refinance in 6 months. Yes, that is true, but at what rate?  A very scary unknown. Why not just get your scores up in 2 to 6 months. It could save you thousands of dollars even in the short term.

 

In part 2, Understanding your Credit Scores, I will get into more detail of how credit scores work and what needs to be done.

 

  • Credit Scores Part 2 – Understanding your Credit Scores

 

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Brian & Marie Spray 11/02/2010 08:39 AM
  2. Lori Mode 11/02/2010 04:14 PM
  3. Gabe Sanders 11/04/2010 12:31 AM
Topic:
Lending / Financial
Location:
New Jersey Gloucester County Glassboro
Groups:
Realtors®
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Tags:
bad credit
credit scores
bad credit mortgage
less than perfect credit
fha bad credit
fha credit scores
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Rainmaker
348,315
Anja Kerstens
Coldwell Banker Residential Brokerage - Morgan Hill, CA
GRI, CDPE, CHS, ASP, Selling Silicon Valley Real

Good to know.  My buyers are approved for a 90% LV home in a soft market.  That surprised me.

Nov 02, 2010 03:40 AM #1
Rainmaker
593,168
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

It's good information to know!

Once again we must prostrate our selves at the feet Lord FICO!

It's true that people with credit problems have low scores. It's not true that all or maybe even most with low low scores have credit problems other than the score. FICO is legalized discrimination! All FICO does is compare you to their abarty norm.

Bill

Nov 02, 2010 03:48 AM #2
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

ANJA... .  I guess they are going for a conventional mortgage?  On a conventional mtg, if you have credit scores under 680, because of the MI companies, you will generally need 10% down. What are their credit scores?  Did they look into an FHA loan?  I only ask, because this might be cheaper for them in regards to their monthly mortgage payment, even with 10% down. Or for the fact that they would only have to put 3.5% down, freeing up some extra monies. Just food for thought.. thanks

BILL.... .  I have mny own thoughts and opinions about credit scores... I have a couple right now who had a medical issue and the wife had a bad divorce. Prior to that, they had excellent credit. They have re-established credit now and 42 months in reserves... Housing increase of only 7%... ratios of 35%/38%... good make sense borrowers, but where the primary borrower has low credit scores... we had them up and they dropped, because their were to items reported after wards that aren't his... getting a letter.. overall, as some know, you could have a good deal, but that just has bad credit scores... thanks

 

Nov 02, 2010 05:54 AM #3
Rainmaker
593,168
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

It's a toss-up do I say "real estate is a people business" or "we are in the people business" the former is more accurate, because it's more inclusive! It includes the consumers.

This is a great example of the consumer's need for the right person! It's not the company (although many are better than others) it's the individual Loan Originator!

A willing and capable LO with the resoures makes all the diffrence! Your clients made a fortutus selection.

As Larry says "Geter done!"

Bill

 

Nov 02, 2010 06:34 AM #4
Rainmaker
472,455
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

Jeff, so glad you are getting this out there - it just needs to continue to be said to counter all the partial and untruths that seem to get out there either via media or "whisper down the lane."

Nov 02, 2010 07:23 AM #5
Rainmaker
97,252
Brian & Marie Spray
www.DFWAreaRealtors.com - Action Realty Group - Frisco, TX
Frisco TX Realtors

Jeff - another clear, informative post!  The next few months could prove interesting Real Estate wise if consumer optimism increases with the political changes happening today.  I just hope the mortgage market is still accessible to all the hard working people out there who have been waiting the last 2 years to sell their home and buy another one!

Nov 02, 2010 08:37 AM #6
Rainmaker
4,798,519
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Great information Jeff.  Don't know how I missed this the other day.  Going to re-blog.

Nov 04, 2010 12:29 AM #7
Rainmaker
480,079
Kevin Kueneke
Caliber Home Loans - Encinitas, CA
San Diego Mortgage Banker

Great post Jeff.  I closed an FHA loan today that needed a little credit repair - all the buyer had to do was dig up an old letter he had showing that an account was erroneous  - it raised his score from 599 to 627 in less than a week, now he has keys to his new home!

I only know of one company that still allows super low credit scores for FHA, but their guidelines regarding late payments are so strict that it is nearly impossible to qualify.  Even if someone does actually make it, the rates and fees are much higher.  I agree with you - take an extra few months to work on the credit and save thousands.

Nov 04, 2010 11:32 AM #8
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