Just spoke to a lender

[lynn33]

I just spoke to a lender. I was surprised  when he said that 660 had to be the  mid score! ! he also told me that for an FHA loan short sale would have to be 3 years out and for conventional it would have to be four years?? We also talked about a gift for the down payment as my mother is going to give me the 20 percent down but he said that I would have to show 5 percent of my own funds without the gift? Does this all seem correct and is that 660 kind of high? By the way I live in Minnesota if that makes a difference. 

[StaticRaven]

Shop around. 660 is a very high requirement for a FHA loan, since some lenders go down to 580 - In my experience, *most* lenders require a 620. So check with a few other lenders or a broker.

You didn't specify whether or not you were looking for a FHA Loan or Conventional - FHA only requires a 3.5% down that can be gifted. Conventional can go as low as 5% (even lower in some cases, I guess) but the requirements are completely left up to the bank.

If you're applying for a FHA Loan and the lender is requiring that, it's called a Lender Overlay (they overlay their requirements over the FHA Requirements, which is fine for them to do). But those overlays are goign to vary vastly by lender.

If it's a conventional, that seems a little tough, most of the time I look at the Gov Standards (Fannie/Freddie) who have requirements for loans right on their site. I think they do require 660 for a 75%> LTV.

Fannie Mae: https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf (PDF Warning)

[StartingOver10]

As mentioned above, each lender has their own requirements over and above the minimum requirements.

If you had a short sale, then 3 years from the date the short sale closed to the new application date is required for a new FHA loan. There is a program (Back to Work program) that will allow a new loan for FHA in 12 months rather than 3 years, but there are additional requirements that the buyer/borrower needs to show the lender. FHA allows 100% gift of the down payment. Conventional does not.

Here is a thread that discusses the FHA Back to Work program: http://ficoforums.myfico.com/t5/Mortgage-Loans/Back-to-Work-Program-income-reduction-documentation/m...

For a new conventional loan, the wait period varies depending upon your down payment. If you have 10% down, then the wait period is 4 years. If you have 20% down then the wait period is 2 years. In each instance the lender will require a minimum of 5% of the purchase price to be from your own funds - not gift funds.

Other lenders will be less strict with your credit score than the lender you spoke with - but the above guidelines are the minimum guidelines without lender overlays.

If you have a low score, expect the lender to want compensating factors: higher down payment is one compensating factor.