CREDIT SCORE BELOW 620
There are some mortgage lenders that accept a credit score below 620.
|| to reach a mortgage specialist "on call".
In this environment, there are only a few lenders that will allow a credit score below 620. Several years prior, people found it much easier to get, even an FHA loan with credit score not being much of an issue. Because of drastic changes within the mortgage industry a credit score under 620 is accepted by only a small group of mortgage lenders for financing with FHA insured mortgages. Technically, there is no actual FHA guideline about credit scores. However, the functions of the mortgage industry, or perhaps lack thereof, is causing this effect.
Since no FHA guideline really requires a particular credit score, essentially every mortgage company today has a certain low credit score requirement in response to the investor criteria. This is because in reality, "FHA Loans", are insured by the federal government; however, the actual funding is put up by mortgage investors; i.e. major institutional and Wall Street type money sources.
It is actually these institutional, Wall Street funding sources that require at least a 620 credit score for purchase money mortgages and refinance programs so that they can profitably sell and trade large pools of these loans. Performance ratios and/or non-performance ratios dictate the value of these assets. Too many loans within any particular group can make an entire securitization unmarketable.
These minimum credit score requirements of 620 which are placed by lenders and their investors are commonly found among purchase money mortgages and refinance programs for FHA, VA and USDA,
Fannie Mae and Freddie Mac conforming mortgages; as well high balance mortgages more commonly are associated with even higher score requirements. Now days, examples of these general credit score sets are above 620; often 680 or more.
THERE ARE GENERAL GUIDELINES FOR FHA
FHA loans per official guidelines generally require:
No Minimum credit score and certainly a credit score below 620 would be acceptable.
Two (2) years good housing payment history. (no 30 day late payments)
Two (2) years of good payments on any auto financing, credit cards and/or other consumer lines of credit showing up on your credit report ( a few scattered
30 day late payments are often acceptable, but you will need to be able to explain, why it happened, and why it won't happen in the future.)
No chapter 7 bankruptcy within the past 2 years ( sometimes you can actually get an FHA loan while in chapter 13, if the chapter 13 is 12 months old
with perfect payment history, and no other derogatory credit since the bankruptcy was filed)
No foreclosure within the past 3 years (if foreclosure on credit, you will need to explain why it happened and why it will not happen again, your
explanation will be subject to the approval of an FHA underwriter)
No collection accounts, charge offs, judgments and/or tax liens can be showing an open balance.
Other FHA guidelines that apply are:
LTV maximum is 96.5%
Seller Concessions toward closing costs are allowed:
Up to 6% of purchase price for 96.5% LTV
Escrow impounds are required.
Thus in effect you may be required to pay in advance at closing for several months worth of property taxes and homeowners insurance.