Credit Score Required to Obtain a Mortgage

What is the required credit score to obtain a mortgage?

3 Answers

That is a good question, not easily answered.  First it depends upon whether one is looking for a purchase mortgage or a refinance. 

Let's first discuss a purchase mortgage.  The required credit score depends upon the loan program one utilizes.  If a buyer is looking for an FHA loan, for instance, many lenders have increased their credit score criteria to 660, while there are still some lenders out there that will consider scores down to 580.  With a lower score quite often a higher down payment is required.

If a purchaser qualifies for a USDA loan and is purchasing an eligible property then there are lenders that will go as low as 580, however a 620 or better score allows certain waivers, i.e. approval with a higher debt to income ratio, removes the need to verify rent and credit explanation letters.

Of course, to get the most favorable Fannie Mae mortgage a credit score of 720 and in some instances 740 is like pure gold.  If one is purchasing an investment property then a minimum of 700 is generally required.

When looking for a refinance, unless one utilizes an FHA program credit scores of 660 and higher has become the lending criteria.

Every lender has their own guidelines for credit and underwriting. Often, it is not just the score, but also the quality of the accounts and pay history that are factors in determining a mortgage approval.

As a very general rule, it is very difficult to obtain most mortgage financing with a middle credit score of less than 620. Some lenders use 640, or even 660 as their cut off mark. In many cases, as of this writing, the best rates and most flexible terms are reserved for scores above 740.

Certain loan programs do not use credit score at all - rather, the underwriters build a credit profile from proof of payments such as rent, utilities, and other monthly expenditures.

Regional lending can also vary - a quick call to a few local lenders will probably give you a good ballpark for your area.

To obtain a Government backed mortgage, VA or FHA, you have to have at least a 580 Fico score. However, most banks will not lend to someone less then a 620 Fico score. Also, so you know, the Fico is determined by the mid of all three of your credit scores. Say Experian is 650, Transunion is 702, and Equifax is 669, your Fico when then be the 669.

CHFA is a low income down payment assistance program. They are privately funded therefore they do not run out of funds. They only require that you pay $1,000 down and then they cover the rest.  Their rates right now are pretty good too, around 5.25%.

You would not have to put down more money due to a lower credit score. If you have a 580 Fico and qualify to go VA, you don't have to put anything down, as long as the Lender you choose accepts a 580 Fico. Fannie and Freddie do not require you to put any additional funds down, this would be a Lender's choice to do. This is set across the board, VA 0 down, FHA 3.5% down, and Conventional 5% down, period.

If you decide to go Conventional and have a Fico lower then 720, you will get a pricing hit. So say someone has an 800 Fico the Lender could quote them 4.875% on a 30 year fixed through Chase, whereas someone with a 680 could be quoted 5.125% on the same type of loan through Chase.