Real Estate
June 1, 2020
link to facebook link to twitter
More Stories
Second mortgage and refinance How to get a mortgage when self-employed income is tricky How the new PPP loan may adversely affect your mortgage How to navigate appraisal during coronavirus pandemic How to plan the optimal time to buy a rental property How to avoid getting a jumbo loan due to Coronavirus A factor that can drive your mortgage cost up How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move How to lower your cash to close when buying a home What you need to know about securing a VA mortgage Mortgage payment relates to purchase price What to expect mortgage rates to change in the upcoming months Loan limits for 2020 make getting mortgage easier Three reasons to buy home at end of year Can you get a mortgage with bad credit? Income and all outstanding loans are key factors to obtain a mortgage Your income is a lifeline to finance a home Don’t be focused on credit when getting a mortgage Why your mortgage goals may not happen Don’t make the mistake of 401(k) home buying Fannie & Freddie change home mortgage appraisals COVID-19-How a mortgage forbearence works How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase No more VA limits in Jan. 2020 Should you cash out to refinance What makes the most sense? Three pricey loan scenarios to watch A surefire way of making loan process a hassle Changing income and job status may affect mortgage chances Six common mortgage loan scenarios How to lower your debt to income when getting a mortgage How to make your financial profile less intricate Paying off debt to buy a house can be challenging Buy a home now or should I wait? Negotiating the purchase price of a house With the virus, should you be buying a home now? How to get a mortgage if you have been furloughed due to COVID-19 Three reasons you should not buy a home Types of loans based on credit score How the FHA 100-mile rules your ability to rent or buy Three quirky issues that will hurt your mortgage Seven common mortgage mistakes Why your mortgage payment keeps changing The credit score it takes to get a mortgage What to expect in today’s loan process? How 1031 tax-deferred exchanges work Six to avoid when purchasing a home How to use rental income to qualify for a mortgage Mortgage inquiry makes your credit score drop? Why waiting for mortgage rates to get better is a losing proposition Transfer property to family and be protected under Prop 13 FHA requirement might hurt buying chances Purchase price should not be most important factor Finances matter when buying a home Could the 30-year fixed mortgage get to 3 percent? Mortgage rate sounds too good to be true How the mortgage process gets ugly if you have a difficult picture Should you go FHA or conventional for purchasing your first home? Two mortgage process problems you will want to avoid Home value when refinancing What you need to know about the mortgage 4506-t document Don’t make mistakes when getting a mortgage refinance A non-traditional program for self-employed mortgage borrowers Should you buy and build or buy a single family home? How expensive your mortgage will be due to bad credit? The loan process and what not to do Should you refinance with today’s mortgage rates? Be careful getting a mortgage if you have a bankruptcy Cash-out refinance or home equity Lender knows how to purchase business? Read the fine print Cash to payment formula when buying a home A bank statement program might help get a mortgage Pulling credit may not make sense Why the VA mortgage is the best home loan Can you use roommate income to get a mortgage? Best benefit for your first-time home buyer Be wary about paying off this type of mortgage Common questions on financed mortgaged insurance loans Things that affect your first-time buyer mortgage options Self-employed income The #1 mistake consumers make when getting a mortgage… How much are closing costs when you purchase a house? Two mortgage loan programs get a better interest rate How much of your mortgage income should be going towards an auto loan? Five quirky refinance scenarios that work Working two jobs makes now easier to get a mortgage How mortgage lender credits work

A loan program you may be eligible for based on your credit score

By: Scott Sheldon
March 22, 2019

Your credit plays an infinite role in your ability to get a mortgage loan. How good your credit stacks up and what your credit history reveals may direct you into one program versus another. Here’s how your credit score drives what program you are eligible for.

It’s no secret getting a mortgage is a bureaucratic and very compliant government control process that requires adherence to dates, time frames and eligibility. Contrary to popular belief, there’s only two types of mortgages available in today’s mortgage environment; government-backed loans and government-insured loans. Government-backed loans including Fannie Mae and Freddie Mac (conventional mortgages) and government-insured loans include FHA Loans, VA loans and USDA loans. Jumbo mortgages are also another mortgage type defined as any dollar amount over the maximum high balance loan limit in the area in which the property is located. For our purposes we’re going to be talking about government-backed and government-insured loans.

If your credit score is 700 or more and you have a 3 or a 5 percent down minimum payment a conventional loan might be the most suitable choice for you so long as you’re sticking with a conforming loan which is $453,100. If your desired loan size exceeds this amount, you’ll start to need at least a minimum down payment of 5 percent with your 700 or higher credit score.

If your credit score is less than 700 you may need to start thinking about the possibility of getting a loan that is insured by the Federal Housing Administration which is more broadly known as FHA. FHA Loans contain a rather pricey form of PMI, however, the interest rates on FHA Loans are lower so it’s actually probable that you might be able to get an FHA loan with a lower payment less than a conventional loan even if your credit score is less than 700 as government-insured loans have better interest rates.

If your credit score is less than 680 you’ll need at least 20 percent down if you’re going to go with a conventional loan in most cases, but not all. The reason being is because conventional mortgages start to ding you on your credit score when you have a less than 680 credit score. FHA Loans do not have such a requirement at all.

If you have a very little down payment such as 3 or 5 percent down and your credit score is 640 or lower all the way down to 580 you almost automatically always need an FHA Loan. FHA Loans are far more lenient in terms of credit than conventional mortgages. The minimum credit score to get a conventional mortgage is 620, however, that’s also going to mean paying a much higher interest rate and fees in the form of discount points.

Generally speaking, if you have 20 percent down or more and you have a 620 minimum credit score or more a conventional mortgage is most often the most practical choice. If you have less than 20 percent down such as 10 percent down, you’ll still want at least at 680 credit score or higher-anything less than a 680-credit score with less than 10 percent down also will almost always automatically point to an FHA Loan.

Other loans that we have not discussed much in are USDA loans and VA loans. USDA loans require no money down whatsoever, but also have income limitations and you can get such a loan with a 620-credit score with no money down.

VA loans do not require a down payment and will go as low as 580 on the credit score to be eligible.

Mortgage tip: if your credit score is less than 580, some lenders on a case-by-case will do your loan.

If you’re looking to buy a house, work with a lender who can intricately navigate you through what program, payment and rate makes the most sense for you and your family financially going forward.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.