Credit is one of the biggest parameters of a lender’s decision to grant you a loan approval or not. There’s a lot of misconceptions out there floating around the internet about what you can and can’t do with the type of credit that you have. Here’s some things to consider if you’re worried about your credit score when it comes to getting a mortgage…
Number one most important thing do not have any mortgage lates in the last 12 months. Mortgage lates will be problematic for almost every type of mortgage product and program available.
If your credit score is anywhere from 705 and up it’s realistic that you would be able to get the three different types of loans available in the market you would be eligible for a jumbo loan, a conventional loan and a government-insured loan like an FHA for example. If your credit score is less than 700, but 680 or higher you’re still going to be teetering on the edge of being able to qualify for conventional financing with less than 20% down and you would be able to get a jumbo loan with a minimum of a 680 credit score.
Once your credit score dips down beneath 680 all the way down to 620 that can still keep you in the realm of getting a conventional loan, but you’ll need a bigger down payment in most cases not all, but in most for example if you’re buying a condominium for example it’s not reasonable that you would be able to purchase a condominium with less than 20% down with a less than 680 credit score your credit score needs to be at least 680 or more in that type of scenario. The minimum credit score that you need for a conventional mortgage is 620.
If your credit score is less than 620 all the way down to 580 then you’re in the realm of either a VA loan if you’re a military veteran or an FHA loan. Not always, but generally speaking if you have decent credit say for example 680 to 700 or more and you’re doing a purchase transaction with 3.5% down it’s almost the same benefit for the most part looking at either a conventional loan or an FHA loan there really isn’t that big of a difference between the two with a 3.5 to a 5% down payment. The bigger separator will be based on coming in with 8% down on a conventional if your credit score is good that could move you out of an FHA loan and into a conventional loan without monthly mortgage insurance.
Some scenarios to be aware of…
If you’re looking to Cash out refinance your house your credit score should be at least 600 or more and should be to pay off debt not home improvement.
If you’re looking at conventional financing and you’re looking at a cash out on a high balance loan or a loan at the conforming loan limit regardless you’re going to be paying more in terms of points and a potentially higher interest rate because the purpose is cash out.
These are some nuances to consider when determining what’s the best direction to go with regards to your finances. Best rule of thumb is to let a lender look at your credit report, supply the financial documentation and make a pragmatic decision about what your ability to do a mortgages based on the advice of a lender not just points and fees, but really getting the right advice can go a long way into helping you get a lower-cost loan based on the credit score that you have
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