Credit Scores Needed for a Louisville Kentucky FHA, KHC, VA, USDA, and Conventional mortgage Loan

Credit Scores Louisville Kentucky FHA KHC VA Conventional mortgage

Louisville, Ky Mortgage Lenders: Credit Scores FHA Loans Louisville Kentucky KHC First Time Home Buyer Credit ScoreLouisville, Ky Mortgage Lenders: Credit Scores FHA Loans Louisville Kentucky KHC First Time Home Buyer Credit Score

What Credit Score do You Need to qualify for a FHA VA KHC Kentucky Mortgage Louisville Kentucky

September 7, 2010Louisville Kentucky MortgageEdit1 comment3 Votes

What Credit Score do You Need to Buy a Home?

by DR on FEBRUARY 8, 2010

When it comes to mortgages and credit scores, there are two really important questions to ask:

–What credit score do I need to qualify for a mortgage?

–What credit score do I need to get the lowest interest rate on a mortgage?

These different but related questions are important if you are looking to buy a home. And the second question is particularly important. With a high FICO score, you can literally save tens of thousands of dollars in interest over the life of a home loan. So let’s take a look at both questions. And if you don’t know you score, be sure to get you free credit score.

What credit score do you need to qualify for a mortgage?

The first thing to keep in mind is that qualifying for a mortgage involves a lot more than just a credit score. While your FICO score is a very important ingredient, it is just one factor. Lenders also look at your income and level of debt, among other things.

As a rule of thumb, however, a credit score below 620 will make buying a home very difficult. A FICO score below 620 is considered sub-prime. In the past there were mortgage companies that specialized in sub-prime mortgages. Because of the challenges in the credit market over the last year or so, however, sub-prime loans have become difficult if not impossible to obtain.

A FICO score between 620 and 650 is considered fair to good credit. But keep in mind, this range of credit scores does not guarantee you will qualify for a mortgage, and if you do qualify, it won’t get you the lowest interest rate possible. Still, to buy a home aim for a score of at least 620, recognizing that other factors weigh in the decision and that some banks may require a higher score.

What credit score do you need to get a low rate mortgage?

It use to be that a score of about 720 would yield the lowest mortgage rates available. Today, the best rates kick in with a FICO score of 760. And interest rates go up significantly as your credit score drops. To give you an idea, the following table shows current rates by credit score and calculates a monthly principal and interest payment based on a $300,000 loan:

FICO Score & 30-year Fixed Rate Mortgage

FICO Score APR Monthly Payment

760-850 4.643% $1,546

700-759 4.865% $1,586

680-699 5.042% $1,618

660-679 5.256% $1,658

640-659 5.686% $1,739

620-639 6.232% $1,844

Of course, the interest rates change daily, but the above table gives you an idea of the importance of a high score when you apply for a mortgage.

Contact me today and I will pull your credit for free. 502-905-3708 or email me at kentuckyloan@gmail.com

Posted by kentuckyloan at 12:41 PM Email This BlogThis! Share to Twitter Share to Facebook Share to Google Buzz

Labels: Credit Score First Time Home Buyer Louisville Kentucky KHC, FHA Loans, FHA Loans Kentucky Housing First time home buyer
Louisville, Ky Mortgage Lenders: Credit Scores FHA Loans Louisville Kentucky KHC First Time Home Buyer Credit Score

How to Rebuild Your Credit
Tips for Raising Your Credit Score
• Pay your bills on time
• If you have missed payments, get current and stay current
• Be aware that paying off a collection account will not remove it from your credit report
• If you are having trouble paying your bills, contact your creditors or see a legitimate credit counselor
• Keep balances low on credit cards and other revolving credit
• Do not have too many credit cards and do not use them maximum credit limit on any of them
• Pay off debt rather than moving it around
• Don’t close unused credit cards as a short-term strategy to raise your score
• Don’t open a number of new credit cards that you don’t need just to increase your available credit
• If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly
• Do your rate shopping for a given loan within a focused period of time
• It is OK to request and check your own credit report
• Apply for and open new credit accounts only as needed
• Have credit cards – but manage them responsibly
• Closing an account doesn’t make it go away
Building a Non-traditional Credit History
If you’d rather not get a credit card or loan, you can create a “nontraditional credit history” instead

 
Joel Lobb
Senior  Loan Officer
(NMLS#57916)
 
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
 Fax:     (502) 327-9119
 
 Company ID #1364 | MB73346

Yes that’s right, 620  is the magic credit score for getting a mortgage loan!

If you are looking any other loan program ie non conventional meaning an FHA loan, a USDA mortgage, a VA mortgage or even Home Path Financing you need to have a least a credit score of 620.

A rapid rescore can fix your credit score in a hurry

 

When it comes to getting a home loan, does your credit report and credit score really matter? Can you use the free credit score you got off the internet to apply for a loan?  What if your credit score is low, can you get a mortgage? What if it is high, will you get a better interest rate? And what the heck is FICO?

Here’s the good news. I am  here to explain things simply and clearly. Step by step I will walk you through all things credit. When I am done, you’ll know what you need to know to understand how credit impacts your ability to get a mortgage so you can make smart home buying decisions.

Below are the important items I will discuss:

  • What is a credit report?
  • What do mortgage lenders use to determine my credit score?
  • What does FICO stand for?
  • What determines my FICO score?
  • What’s a good FICO score?
  • What if my FICO score is below 620?
  • Can I get a copy of my credit report?
  • Ah Ha! Now I understand all things credit and I’m this much closer to owning my home!

What is a credit report?

A credit report record’s your credit history including information about:

  • Your identity: name, social security number, date of birth and possibly employment information.
  • Your existing credit: credit card accounts, mortgages, car loans, students loans etc.including credit terms, how much you owe, and your payment history.
  • Your public record: Judgments against you, tax liens or bankruptcies.
  • Recent Credit Inquiries: Requests for your information from companies extending credit such as credit card companies, auto loans, etc.

Be aware, credit card companies, car companies and mortgage lenders use slightly different models to determine credit risk. Today we are focusing on Mortgage related credit.

How do lenders calculate my credit score?

Your credit score is the key to your castle. Your home is most likely the most expensive purchase you will ever make. Therefore, when buying a home, lenders use a different system for assessing risk than credit card companies or even auto loan companies use.

Mortgage lenders use a comprehensive system of checking credit called a Residential Mortgage Credit Report (RMCR), commonly called a “Tri-Merge” report. The RMCR report combines your three credit reports from the three national credit bureaus, Equifax, Experian, and TransUnion. Each credit reporting agency calculates your credit score or FICO Score differently. Therefore, pulling from all three bureaus gives lenders a more complete picture of your credit behavior.

Once pulled, lenders use the average of these three scores, usually the middle score, to determine loan qualification and interest rate. For example, if Equifax gives you a 720, Experian a 730 and TransUnion a 740, the lender will use the 730 FICO Score to help determine the terms of your mortgage. If you are applying for a loan jointly, your partner’s three reports will also be pulled.

What does FICO stand for?

FICO stands Fair, Isaac and Company. Over 25 years ago, lenders began using FICO’s scoring model, or algorithm, to fairly and more accurately determine a person’s credit risk. Since it’s inception, FICO’s continually updates its’ algorithms to reflect more current lending trends and consumer behaviors. Today, FICO Scores are used by over 90% of enders. Importantly, your FICO score can impact your loan interest rates, terms, approvals and more.

What determines my FICO score?

A Mortgage FICO score is determined by an algorithm that generally looks at five credit factors including payment history, current level of indebtedness, types of credit used, length of credit history and new credit accounts.

What’s a good FICO score?

To qualify for a conventional loan, most Mortgage lenders require a FICO score of 620+. The best interest rates go to borrowers with a 740+ FICO score. For each 40 point drop, borrowers can expect to see a slightly higher interest rates by about 0.2 percentage points.  If a borrower drops below 660, the increase is likely to be twice as big, a 0.43 percentage point increase. If your credit score is below 620, it is very difficult to get a conventional loan in today’s marketplace. However, don’t be discouraged. You may still be able to buy a home.

Qualifying Credit Scores

What if my FICO or credit score is below 620?

If your score is below 620, you may still be able to buy a home. There are several options:

  • Put more money down. Some lenders offset a weak credit score with a higher down payment. A higher down payment gives you more equity in your home, lowering the lender’s risk.
  • You may qualify for a non conventional government issued loan such as an FHA, Veterans Affairs and/or U.S. Department of Agriculture loan which have less stringent lending requirements.
  • You may work to get that credit score up!
    • Correct any errors on your report. Analyze your credit items line by line. If you notice a mistake, dispute it right away with either the credit bureau providing the report or the company that providing the incorrect information to the credit bureau.
    • Make all your payments on time. Late payments are the No. 1 way to lower  your credit score.
    • Pay down revolving debt. Keeping your credit balances low helps to raise your score.
    • Sit back and relax. As long as you’re paying down debt and making payments on time, your credit score will eventually rise on its own.

Can I get a copy of my credit report after a lender has pulled it?

Yes! In fact, you can get one free credit report every twelve months from each of the nationwide credit bureaus—Equifax, Experian, and TransUnion. You may also purchase your credit score at any time from any of the credit bureaus. Some Mortgage lenders will tell you your score when you apply for a loan or even give you a copy of your report but they are not required to do so. However, if a lender denies you credit, under the Fair Credit Reporting Act (FCRA) you are entitled to a free copy of your personal credit report if you have received notice that in the past 60 days you have been declined credit.

You ALWAYS get a free copy of your credit report from me.

I believe in transparency. When you apply online, we will pull your credit from all three agencies and give you a free copy. You don’t even have to ask for it. It will be in your inbox for your review at the same time we get it for review. It’s part of the Approved Buyer’s Cert (ABC) process. I will give you an underwritten mortgage approval. Better than a pre-approval based on assumptions, it’s an actual mortgage approval. Know what you are approved to purchase even before you find the home of your dreams. Simple and straightforward. 

I know it can be intimidating getting approved to buy a home, so rest assured I will try and make it as easy as possible for you and I will be glad to answer any of your questions about the home buying process.
Below are some items (in red)  that we will review for your mortgage loan pre-approval letter to purchase a home along with some different loan programs to consider:
 Credit: 
 
What kind of credit score do I need? 
Most lenders want a 620 credit score nowadays, however, there are some lenders now doing FHA and VA  loans down to a 580 score with no bankruptcies and no foreclosures in the last 2 years.  You have three fico scores from experianequifax and transunion credit reporting agencies and the lenders  will throw out the high and low score and take the middle score of the borrower(s).  For example if you have a 598, 625, 604 on each of the main three reporting agencies, then your qualifying fico score would be 604.
  
Down Payment: 
 
 
How much down do I need for a down payment?
If you don’t have access to a down payment or would like to keep your money in savings, there are still housing programs that exist for Kentucky home buyers whereas you can purchase a home with no down payment. You will need a 620 to 640  middle credit score to purchase a home using the USDA or KHC loan programs for their no down payment credit requirements.
The first no money-down home  loan program called,  KHC,  currently offers $6000  in down payment assistance (DAP)  along with a 30 year fixed rate loan of 5.00%. The maximum income limits are $117,000 for a household with a max loan of $282,000. This loan program sponsored by Kentucky Housing Corp. or (KHC) requires a 620 minimum credit score and can be done anywhere in

​Kentucky.
The second no money down home loan option is the USDA program for properties located outside urban areas of Kentucky areas where you can secure a no money down loan at a current low fixed rate of 4.25% on 30 years.  The max household income limits usually are between $80k to $103k for most rural area counties depending on household family size. A 640 middle credit score is needed for loan approval on this program. If you are looking in the area that is in an USDA eligible area, then this program should be available to you. I just need the address to determine if it’s an eligible USDA area. 
Alternatively, If you have access to a down payment (3.5 % or more of the sales price) , we can always look at doing a FHA  loan and  go down to a 580 credit score. There are no income limits oror geographical restrictions on a FHA loan.

​ If your credit scores are higher, say 680 or above, we can look at doing a conventional loan with Fannie Mae and possibly get you better terms on your payments when it comes to mortgage insurance and interest rates.​

Lastly, There are some programs offered to home buyers here locally that if they have a credit score higher than 660, you can do a no money down home loan with no mortgage insurance. This Is good for buyers they have no money to put down, but not have to go with a FHA loan and pay mortgage insurance for life of loan.


If your credit scores are a little low now, we can look at doing some improvement to your scores through the rapid-rescoring program we offer free of charge as I described above. It seems like you have a handle on this with your student loan error, so it may be best to let you work on this.
Keep in mind mortgage rates are currently in an trending-up pattern, kinda like gas prices they change everyday, so I would go ahead and starting getting these things together below so we can lock in your rate and secure a low 30 year fixed rate.
Income: 
 
How much income do I need to qualify for a mortgage loan?
The maximum house payment is usually limited to 1/3 of your gross monthly income. For example, if you make $30,000  a year or $2,500   gross a month, then  x  that by 31%, and this would equal about a $824 maximum house payment you would qualify for. Again this is just the max, you don’t have to go that high on your ratios. Once I verify your income. 
On a house payment, there is more than just the principal and interest payment that is included. You also have to pay property taxes, home insurance, and mortgage insurance that is all included in the house payment..We can go over this on your loan pre-approval.
In order to get you pre-approved for your max loan amount, I will need the following items from you. This is a free process and I will give you a copy of your credit report for free!
​Mortgage Pre-Approval Checklist Below
1.  Last 30 days worth of pay stubs
2.  Last 2 years W-2′s
3.  Last 2 years tax returns
4.  Last two months bank statements for all accounts including 401 k or retirement account  if you have one
Once I get the information above, I can usually get you pre-approved in one day, and get your loan closed in 30-45 days after you get an accepted offer on a home.
Your first house payment usually starts 30-60 days after you close.
Your loan pre-approval is usually good for 60 days.
I don’t need originals, copies are fine. You can fax or email  me the above documents,  or meet me face-to-face if you wish to make copies and go over your options.
Let me know your questions.
Thanks and look forward to helping you

​!​



Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364
 
 

Text/call:      502-905-3708

fax:            502-327-9119
email:
          kentuckyloan@gmail.com
 
 

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