Your FICO Score…aka Credit Score

Your FICO score is the first thing a mortgage lender will check when seeing if you qualify for a loan.

While there are many factors involved in qualifying for a loan, your credit score is the most important. The minimum credit score you need to purchase a home will depend on the type of home loan you qualify for. Before the 2007-2008 housing market crash, it was much easier for people with poor credit to find subprime loans. Lenders were not as heavily regulated as they are today.

In 2010 Obama signed the Dodd-Frank Wall Street reform into law.  This tightened up the

requirements in the mortgage industry & made it more

difficult to qualify for a loan. Especially people with low credit scores.

How Credit Scores Effect Interest Rates:

579 and lower – You will have a credit score as much as 2% higher than the current lowest rate.

580-619 – You should expect an interest rate as much as 1% higher than the lowest rates available.

620-679 – Rates could be .5% higher than someone with great credit will receive.

680-739 – Average rate; You won’t be affected much at all in this range.

740 and higher – You’ll be offered the best rates mortgage companies have to offer.

If you have a poor credit rating…

The best home loan to get is an FHA loan. FHA loans have the lowest credit requirements of any mortgage, in order for the FHA to insure a mortgage loan the borrower must have at least a 500-credit score with a 10% down payment.  If you have a 580 or higher FICO score you will just need a 3.5% down payment. Getting approved for an FHA mortgage with a 580+ score is much more likely than if your score was below 580.

Tips to increase your credit score quickly:

• Pay Down Your Credit Card Balances
• “Pay For Delete” – An agreement that you agree to pay the balance and in return the creditor agrees to remove the account from your report
• Become An Authorized User – A family member or friend can add you as an authorized dealer to their account to boost your score up to 30 points.

Already own a home but want to buy a new one? Understanding your loan options

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