Why does every say you have to have a least a 620 score for FHA loans

[Anonymous]

I am curious why lenders require at least a 620 score for FHA loans when no where in the guidlines states anything about credit scroes.

Me and my husband are about 30-45 points from having a 620 score and have made mulitple offers on homes. We make aprox 120K together a year. I have since paid off all my collection accounts and was wondering how long does it take for the clean up work to happen. How do I know if all my hard work will pay off?

Should we stop looking at homes until we have higher credit scores? We have the 3.5% down payment

Standard Sales are a thing of the past. What are the banks looking at on these Short sales and Bank owned properties.

Please help me and my husband argue all the time because he doesn't believe that we need a 620 score but maybe thats why no one is taking our offers seriously.

any feedbck is appreciated. Thank you.

[MattH]

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@Anonymous wrote:

I am curious why lenders require at least a 620 score for FHA loans when no where in the guidlines states anything about credit scroes.

Me and my husband are about 30-45 points from having a 620 score and have made mulitple offers on homes. We make aprox 120K together a year. I have since paid off all my collection accounts and was wondering how long does it take for the clean up work to happen. How do I know if all my hard work will pay off?

Should we stop looking at homes until we have higher credit scores? We have the 3.5% down payment

Standard Sales are a thing of the past. What are the banks looking at on these Short sales and Bank owned properties.

Please help me and my husband argue all the time because he doesn't believe that we need a 620 score but maybe thats why no one is taking our offers seriously.

any feedbck is appreciated. Thank you.

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 For one thing, because FHA penalizes lenders for having a high default rate.  During the boom this was not a major issue because people could sell or refinance based on the rising value, but now lenders have to be more strict to keep down default rates.

[Anonymous]

Matt,

I have been working on cleaning up my credit over the last few weeks have have settled or paid off all of my collection accounts. My current credit is great no lates for two years. But my score (545-565-588) really suck. My husband (603-595-596) We have taken advise from our lender to clean this stuff up. But I am scared to keep makeing offers if the banks are going to ignore them because of this factor.

How long will it take for these credit agencies to update the changes and how could this effect my credit score? Will it help. What will get me 40 points?

[Anonymous]

I may be wrong, but I believe the 620 is because the people buying the loans from the banks require the 620 score.  We were pre-approved and locked in with a score of 597 until the requirements all changed to 600 and then to 620 shortly thereafter.  We paid our credit cards from 95% utilization to just under 20% and got a 40-50 point boost on all our scores.  We worked with our loan officer on a rapid rescore.  The process took about 2 weeks from the day I paid all the cards.  Without the rescore I believe the process usually takes at least 30 days.

[haulingthescoreup]

Hi, welcome to the forums!

This answer isn't specifically for mortgage questions, but I hope your lender mentioned that paying off collections will not change your FICO scores in the slightest. It does make future lenders happier, of course.

If you haven't already, please read Understanding Your FICO ® Score and Credit Scoring 101 (at least the first post.)

These will give you the background knowledge you need to understand what affects your scores, and how you can best improve them.

Right now, you should probably check out the Frequently Requested Threads (link in my siggy) and read up about GW (goodwill.) If there are any collections you haven't paid off yet, you should definitely read about PFD (pay for delete), because you have a bit of leverage in that situation.

[WannaHouse]

First, paying off old collections will not help much if any at all. If you have CC's, pay them way down. That will give you a BIG boost. Judgements and Tax liens have to be paid off.

What did your lender say was dragging your scores down so much?

Also, FHA could really care less what your credit scores are. It's the lenders that want 620 or above. I heard that soon it may jump up again to 660!

As far as not taking your offers seriously, you need to find a lender, get pre-approved, THEN find a house and make an offer.

Message Edited by WannaHouse on 04-10-2009 08:14 PM

[Anonymous]

Tanya, is that you?

[Anonymous]

We have already been approved, but our lender keeps pushing us to get our scores up. If paying off the old debt and obtining deletion letters won't work then what will. I have two really small CC if I pay them down to 30% are you saying that I will jump up my score, even with all the collections? 

(ME VENTING) - nothing personal to who ever is reading this...

This is so confusing. Lenders say pay the debt because it needs to be paid, but paying the debt won't help either won't get your score up. But it sure puts a ding in it. How do people get this rectified with paying some snotty Second chance Financial company to argue with the reporting companies to get it removed. MONEY MONEY MONEY. I keep spending money. And keep getting backword advise from people.

SOMEONE HELP ME UNDERSTAND.

[Anonymous]

I am not sure I understand. You say you have already been approved...did your mortgage lender provide you with a "Pre-Approval" Letter? Not a Pre-Qualification letter but a Pre-Approval letter? If they have already approved you all you should have to do it find the property, put in an offer, have an adequate appraisal and close. Why on earth would you need to raise your score if they have already completed the approval process?

[Anonymous]

It is a catch 22.

To pay off chargeoffs/collections or not. Paying them off isnt going to raise your scores much if at all but having them list as paid looks better in a manual underwrite.

To pay down/pay off cc or not. Paying them down of off may help with DTI issues and look better on a manual underwrite but depending on any number of factors your score might not change much.