It was recently announced there’s a credit score change to conventional loans. This credit score change is now shaping the way families can procure a mortgage. If your credit score needs a little bit of love, and where you should be concerned about your credit score.
FHA mortgages require a 580-credit score with most banks and lenders. Some even have credit score requirements of 620. The FHA supports the lowest credit score available which is 580 for government financing. Conventional loans however now require a 600-credit score. You are reading that right the old credit score for conventional mortgages used to be 620. This change from 620 to 600 represents an additional segment of the market that can now secure financing for both purchased loans and refinance loans. As a result, if you’ve been in an FHA loan for example with monthly mortgage insurance and haven’t been able to refinance because your credit score is less than 620, you can now move out of pricing monthly mortgage insurance and have a lower fixed cost form of affordable homeownership. If you’ve been trying to buy a house, or have a down payment but want to avoid PMI you can do that with a 600 credit score these days.
What you need to know is this; your interest rate will be a little bit higher, and you might have to pay points which is an upfront overhead as a percentage of the amount financed to secure the mortgage loan due to the level of risk the lender takes. If you’re looking for financing and want to better understand what you’re trying to do and how the options relate to your specific situation contact a local lender who understands the market and can best advise you about your choices and options and help you navigate through the world of home loan finance.
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