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Importance of credit score for FHA

Regular Contributor

Importance of credit score for FHA

It looks like my wife and I are going to make an offer on a Fannie Mae HomePath house that is in the First Look period. We'd be putting 3-4% down and financing FHA. The loan would be under my name/credit only.

 

Scores from MyFICO are 745 EX, 743 TU, 776 EQ. I'm pretty sure I could push EX or TU past 760 if I brought my CC allocation down from 28 percent to less than 7 percent.

 

Question: Is there any advantage to doing this, if I'm going FHA. Would my rate be the same with a mid-score of 745 as it would be with one of 760+?

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Message 1 of 12
11 REPLIES
Contributor

Re: Importance of credit score for FHA

Your rate would stay the same as long as you meet the minimum score requirement which is typically 640.  So, if you have a 640 or an 800, same rate.

Message 2 of 12
Valued Contributor

Re: Importance of credit score for FHA

credit scores affect interest rates.  I believe 760 is the score needed to get the best interest rate....but, it may be 720.

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 3 of 12
Contributor

Re: Importance of credit score for FHA

Credit scores do not affect interest rates for FHA.  Everyone gets the same interest rate as long as they meet the minimum score which is usually 640.

Message 4 of 12
Valued Contributor

Re: Importance of credit score for FHA

oops...

 

i'm just noticing that it says 'for FHA'.  You know, reading IS fundamental.  Smiley Very Happy

 

My apologies.  Credit score directly impacts rates for conventional loans.

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 5 of 12
Established Contributor

Re: Importance of credit score for FHA

Why don't you go conventional. I had a 720 middle score and qualified for a 3% down conventional loan. It will save you more money in the long run

BK in January 2008---Barclay's Apple Financing Card ($10,000) --- Capital One Quicksilver ($13,000)--- Platinum Delta Skymiles ($35,000) --- GEMB CareCredit ($10,000) --- AUFCU ($10000)---Discover IT ($33,000)

Experian 827 Transunion 828-- Feb 2018
Message 6 of 12
Regular Contributor

Re: Importance of credit score for FHA

I've been thinking along those lines, I might even hit the 401k hard and cough up a full 20%--but I don't relish the penalties. Smiley Frustrated

Costco TrueEarningsSallie Mae MasterCardDiscover itUS Bank Cash+Chase SlateBlue Cash EverydayFidelity VisaTU-803/EQ-808/EX-800
Message 7 of 12
Established Contributor

Re: Importance of credit score for FHA

You generally DON'T have to be penalties when you withdraw early from a retirement plan to purchase a home. Check with your financial advisor but I am pretty sure that is the case. You can also get a loan from your 401K that you can pay back

Even if you only put down 5% on a conventional loan, you still save a ton of money in upfront mortgage insurance and lifelong MI.

BK in January 2008---Barclay's Apple Financing Card ($10,000) --- Capital One Quicksilver ($13,000)--- Platinum Delta Skymiles ($35,000) --- GEMB CareCredit ($10,000) --- AUFCU ($10000)---Discover IT ($33,000)

Experian 827 Transunion 828-- Feb 2018
Message 8 of 12
Frequent Contributor

Re: Importance of credit score for FHA


aussiesareforever wrote:
You generally DON'T have to be penalties when you withdraw early from a retirement plan to purchase a home. Check with your financial advisor but I am pretty sure that is the case. You can also get a loan from your 401K that you can pay back

Even if you only put down 5% on a conventional loan, you still save a ton of money in upfront mortgage insurance and lifelong MI.

 

this is incorrect.  The only way to avoid paying the 10% penalty is to put the money in an IRA before you cash it out (or something along those lines)...but even that process has a 10k limit.

 

If you take a distribution to purchase your home....you pay the penalty.


Message 9 of 12
Established Contributor

Re: Importance of credit score for FHA


basballguy wrote:

aussiesareforever wrote:
You generally DON'T have to be penalties when you withdraw early from a retirement plan to purchase a home. Check with your financial advisor but I am pretty sure that is the case. You can also get a loan from your 401K that you can pay back

Even if you only put down 5% on a conventional loan, you still save a ton of money in upfront mortgage insurance and lifelong MI.

 

this is incorrect.  The only way to avoid paying the 10% penalty is to put the money in an IRA before you cash it out (or something along those lines)...but even that process has a 10k limit.

 

If you take a distribution to purchase your home....you pay the penalty.


10 K is a lot of money, it could very well be all the OP needs to make a 20% deposit on his home. And he can always take a loan from his retirement fund and not have to pay the penalty


BK in January 2008---Barclay's Apple Financing Card ($10,000) --- Capital One Quicksilver ($13,000)--- Platinum Delta Skymiles ($35,000) --- GEMB CareCredit ($10,000) --- AUFCU ($10000)---Discover IT ($33,000)

Experian 827 Transunion 828-- Feb 2018
Message 10 of 12