But, you said I'd qualify

By
Mortgage and Lending with Christensen Financial Mortgage 385907

But you said I needed a score higher than 640 for FHA. Mine's 651, but now you tell me my credit isn't good enough.

What's up with that?

Okay, lenders/investors establish credit score minimums for the programs they offer, and essentially if you don't pass the scoring test than you don't pass GO!

Just as a reference, for clarity's sack. We're talking about

middle score, for one applicant, or lower middle score for two

What this means is that the lender throws out your highest and your lowest scores, and when there are two applicants then uses the lower of the two remaining scores. psst; this is also the way your loan is priced.

Another point here is that if you are in the preapproval stage and the lender does not pull a tri merged credit report, a mortgage report now, they can't really tell you squat, as they do not have enough info.

Now, let's say that you have passed the credit score requirement, is that good enough?

Noooooooooo!

You must now deal with the credit profile itself, which creates the score. You know how you actually pay. Here's two examples, that for the sake of arguement we'll say both have 651, lower middle scores. One which I, personally (one man's opinion now), will find acceptable. One which I will not.

Hint: keep in mind that 651 is not a high score, so when I see this I immediately start looking for what brings it down, or to this point.

Example #1

the buyer has a decent profile, but the recent reporting of some unpaid medical bills has brought it down to 651. Six months ago the score was over 700. In todays world the underwriter may require (count on it) the bills to be paid, but the score and the profile are deemed acceptable, and the loan is approved with conditions.

 

Example #2

the buyer had also previously had a credit score over 700, but three, 30 day lates on credit cards, over the last 12 months have reduced the score to 651. To me this is a problem. The rule of thumb, that I use, is you need to wait 12 months from the date of the last late payment. Some, may consider this conservative, and considering the rest of the profile it may be, but the late payments are a problem, in my humble opinion, and I don't expect this file to be approved.

Same score though

So, yes the buyer has been told the required scores, and this is what they heard clearly.

But, that may not be enough to pass GO! 

Comments (2)

Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Credit scores can be a moving target for many people. Certainly more so, when they are late on a payment from time to time. When I take a mortgage application, I explain the importance of not missing a payment or charging up credit cards during the process. Unfortunately, not everyone listens.

Aug 24, 2012 07:03 PM
Jay Beckingham
Christensen Financial Mortgage - Port St Lucie, FL
Seniors ROCK!

Joe,

I do a lot of government loans and I stress the last 12 months. i am a teacher for the homebuyers education course in ft myers and this issue raises some eyebrows in class.

 

thanks

jay

Aug 24, 2012 09:10 PM