Loan Prequalification – Credit

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blog-author-clayjeffreys3

While summer has begun, it won’t be too long before people begin to plan on buying a new home for the fall… a chance to be in a new home for the Thanksgiving… the holidays… New Years. The fall may seem like it is far off, but it will be here before we know it.

For the month of June, my posts to The Mortgage Blog will focus on the four aspects of buying a home. We’ll start today with a qualifying credit history/credit score.

When it comes to credit scores, there are different requirements based on the loan program being used. For the most part, borrowers use either a Conventional loan or an FHA loan to buy a home. I will focus on these to loan programs.

– Conventional loans require a minimum credit score of 620. There is not a specific trade line requirement for conventional loans. You don’t need a certain amount of active credit accounts, nor do these accounts need to be open for a specific period of time. Speaking specifically about credit scores, as long as a borrower has a 620+ credit score and receives an Approve/Eligible through Automated Underwriting, they are good to go!

– FHA loans technically require a 580+ credit score to receive the maximum financing allowed under FHA guidelines, but it is tough to find a lender who will do an FHA with a credit score that low. There are lenders who will approve an FHA with a credit score as low as 600, but most lenders require a 640+ credit score. In addition to the credit score, FHA loans requires a minimum amount of trade lines (credit accounts) on a report. While a borrower doesn’t need 2 active trade lines that are a year old, they need to have 2 trade lines that are/were active for at least 12 months in the past 3 years. Note that student loan payments that are in deferment or authorized user credit card accounts do not count toward the 2 trade line requirement.

As you can read, a perfect credit score isn’t required to purchase a home. In fact, a credit score of 620-640 would be considered “poor” by online credit agencies. As we’ll discuss next week, a 620 credit score with only a 5% down payment can get you into a new home.

If you are reading this and thinking about a new home for the holidays, I would be happy to help you get the process started. Contact me today. if you are buying a home in Georgia, I can help you buy that home!

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3 Responses to “Loan Prequalification – Credit”

  1. Loan Prequalification – Down Payment | The Mortgage Blog Says:

    […] a series on the loan prequalification process. Last week we discussed minimum credit scores. Today, we will focus on several aspects of the down payment including the minimum amount, getting […]

  2. Loan Prequalification – Income | The Mortgage Blog Says:

    […] is the third part of a four part series on the prequalification process. We started with credit scores, continued on to down payments, and today will focus on income. Generally speaking, I’ll […]

  3. Loan Prequalification – Collateral | The Mortgage Blog Says:

    […] of June, The Mortgage Blog focused on each aspect of the prequalification process. We started with credit, moved to down payments, touched on income, and will finish today with the collateral that secures […]

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