Conventional 97 Loan? Not perfect credit?

JMMD · ‎01-20-2016

I just heard about this mortgage option today. We have been consdiering FHA but I like the idea of only 3% down and the fact that PMI goes away at 80% LTV where as FHA is permanent. With Conventional 97 the minimum CS is 620 which we are above. The last time I checked our lowest mortgage score was 640 and should be higher now. We have a nice mix of CC, auto loan, SL and a personal loan that is now paid off.

However, we have a BK that was discharged 4 years ago in Feb and late student loan payments right ater that time. We have had perfect payments on everything for three years now though. Our DTI is fine, we will have 3% down(3.5 if needed), closing costs, 401K for reserves and good income. WIll the BK and late SL payments affect our chance for the conventional 97? I know FHA is more friendly for bad credit. Thoughts?

Anonymous · ‎01-20-2016

The thing with scores in the 640 range for conventional is the PMI rate will be very high and so will the interest rate as they are both directly correlated with credit score where FHA is not as credit score sensitive to these things. 3% down and a 640 score will put you at the highest ranges of rates more than likely. http://www.radian.biz/page?name=MIRateFinder#rateCalcResults. Click the link to see what your PMI would be. Most people say conventional 97 works best for those with scores over 700. My wife and I are considering a conventional 97 and our middle score is 709 and the rates are ok, but PMI gets better at 720 and above and interest rates get much better at 740 and above.

cartwrna · ‎01-20-2016

Awesome tool Southeast80! I had to bookmark the page

Don’t take your credit for granted, use it with care! These days, catch me in the bankruptcy forum!?

Anonymous · ‎01-20-2016

@cartwrna wrote:
Awesome tool Southeast80! I had to bookmark the page

I've been using it the last few months to get as accurate a picture as possible after I found that Radian is one of the PMI companies that are used with loans.

JMMD · ‎01-20-2016

@Anonymous wrote:
The thing with scores in the 640 range for conventional is the PMI rate will be very high and so will the interest rate as they are both directly correlated with credit score where FHA is not as credit score sensitive to these things. 3% down and a 640 score will put you at the highest ranges of rates more than likely. http://www.radian.biz/page?name=MIRateFinder#rateCalcResults. Click the link to see what your PMI would be. Most people say conventional 97 works best for those with scores over 700. My wife and I are considering a conventional 97 and our middle score is 709 and the rates are ok, but PMI gets better at 720 and above and interest rates get much better at 740 and above.

Thanks for the info and link! Looks like we are better off going FHA right now. Maybe we can refinance down the road to elimate the PMI.

ashjt2011 · ‎01-20-2016

4 years post bankruptcy is when you can get approved for conventional. But as the above mentioned - the PMI makes it better to go FHA and refi down the road.

Anonymous · ‎01-21-2016

@JMMD wrote:
@Anonymous wrote:
The thing with scores in the 640 range for conventional is the PMI rate will be very high and so will the interest rate as they are both directly correlated with credit score where FHA is not as credit score sensitive to these things. 3% down and a 640 score will put you at the highest ranges of rates more than likely. http://www.radian.biz/page?name=MIRateFinder#rateCalcResults. Click the link to see what your PMI would be. Most people say conventional 97 works best for those with scores over 700. My wife and I are considering a conventional 97 and our middle score is 709 and the rates are ok, but PMI gets better at 720 and above and interest rates get much better at 740 and above.
Thanks for the info and link! Looks like we are better off going FHA right now. Maybe we can refinance down the road to elimate the PMI.

You got it. Interest rate and mortgage insurance will be much higher on a conventional vs. FHA for you right now.

JMMD · ‎01-21-2016

@Anonymous wrote:
@JMMD wrote:
@Anonymous wrote:
The thing with scores in the 640 range for conventional is the PMI rate will be very high and so will the interest rate as they are both directly correlated with credit score where FHA is not as credit score sensitive to these things. 3% down and a 640 score will put you at the highest ranges of rates more than likely. http://www.radian.biz/page?name=MIRateFinder#rateCalcResults. Click the link to see what your PMI would be. Most people say conventional 97 works best for those with scores over 700. My wife and I are considering a conventional 97 and our middle score is 709 and the rates are ok, but PMI gets better at 720 and above and interest rates get much better at 740 and above.
Thanks for the info and link! Looks like we are better off going FHA right now. Maybe we can refinance down the road to elimate the PMI.
You got it. Interest rate and mortgage insurance will be much higher on a conventional vs. FHA for you right now.

Thanks again! We will go for FHA in March.

DallasLoanGuy · ‎01-21-2016

we cant do the 97 conv unless it is a low/mod income deal. maybe if it is in certain census tracts as well.

check with your loan officer before you get too far

Retired Lender

Anonymous · ‎02-03-2016

I read somewhere (not these forms) 680 is the cutoff for the 97 loan. You said your LOWEST score was 640+ but your middle score is the magic #. On top of top of that, I have searched multiple lender websites and cannot find anyone that is actually offering this loan option. You and I are in similar boats. My mid mortgage score is 650 and hoping for a 30pt increase by August. I know that with 640+ you may be able to do 5% conventional? I believe I will have to go FHA and refinance at a later date because of unexpected circumstances that drained our savings. An additional 1.5% doesn't seem like a lot but it really is a lot when trying to save by a certain date. Best of luck!