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640 is the new 620 for FHA - Wells and BOA raise requirements

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Anonymous
Not applicable

640 is the new 620 for FHA - Wells and BOA raise requirements

http://www.bloomberg.com/news/2010-11-17/home-ownership-gets-harder-for-americans-as-lenders-restric...

 

 

If you were waiting to get 5 points above 620 to trigger an FHA, you may have to find another lender besides Wells Fargo and BOA.    The rest of the industry is likely to follow these two big lenders up to the 640 level.

 

 

That means your new "safe score" is really 655 instead of 635... which gives you enough breathing room between the cutoff score in case you take point hits for inquiries between your mortgage app and closing.

Message 1 of 13
12 REPLIES 12
Anonymous
Not applicable

Re: 640 is the new 620 for FHA - Wells and BOA raise requirements

It is more the other way around.  Most smaller banks have already went up to 640.  So BofA and Wells are following them.  But yeah, the ones that are left will soon follow suit.  I am sure there will still be a few out there still advertising 620 loans, but getting them closed and finding investors to buy them will be difficult.  Also, you will probably see some price adjustments for loans like that just as currently you have price adjustments for loans under 620 often times.

Message 2 of 13
BrianB_The_Loan_Professor
Valued Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirements

The article is partially true

I just checked because of a purchase i am working on has a 635

and wholesale is still at 620 through wells

you did scare me though

it is just a matter of time - it has been trending this way for a while now

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Brian B The Loan Professor
Mortgage Banker - offering FHA, VA, USDA , and Conventional mortgages in all 50 states -

If I do not respond to a follow up question please feel free to contact me directly
Message 3 of 13
MBOhio2
Established Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirements

So is it true that some lenders are reversing course and going back down to 620??

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 4 of 13
Anonymous
Not applicable

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

BOA just told us that their requirement for FHA went down to 600.

Message 5 of 13
ShanetheMortgageMan
Super Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

A lot of lenders have started lowering their FHA & VA (and some even their USDA) score requirements to 600 or 620.  Wells Fargo will go even below that.  Keep in mind it's a FHA requirement (not a lender requirement) that any score less than 580 requires 10% down.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 13
MBOhio2
Established Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

Thanks Shane... my scores may very well end up above 640 (still waiting for CC pay-offs to report), but I'm thinking I may miss it a little and end up between 620-640.

 

All we need is a pre-approval to begin building our home and then I'll have 8 months to get my scores much higher to be comfortably well above the 640 by the time we actually close. Therefore, I'm trying to find a lender that will be able to provide us with pre-approval with a middle score between 620-640 just so we can get started building!

 

We won't need to worry about being below 580, though we already have about 7% to put down.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 7 of 13
ShanetheMortgageMan
Super Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

I bet the builder needs the pre-approval letter to show their financing in order to get another draw to start building a home, and not so much that they don't want to build a home unless they have a willing and able buyer to close right then & there.  The builder's financing either permits "spec" homes to be build, which are homes based on the speculation that they will have a buyer make an offer by the time the home is complete... or the financing requires that to get money to build a home, there must be an offer with a pre-approval letter.  So, if that is really what the builder needs the pre-approval for, then you may find a loan officer willing to write you a pre-approval letter based on the projection your scores will reach a certain level by closing, etc... and see if that type of pre-approval letter would be sufficient for the builder's financing.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 8 of 13
MBOhio2
Established Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

The builder requires a pre-approval letter within 30 days of signing the purchase agreement in order to offcially begin building. Given my SL issues, we specifically asked if pre-approvals with conditions (e.g. continue to pay SL payment plans on time until house is built) would be acceptable and they said yes, a pre-approval with conditions is fine. I suspect that if I'm not above 640 by the time we apply (June 10th) that credit score may be a condition too. We had a special "Financing Contingency" written into the purchase agreement to give us a little more protection as well.

 

I'm not sure the exact reason for the pre-approval - if it's for their own financing purposes of if it's to lock in a guaranteed buyer... it sounds like it may be a combination of both given what I know about this subdivision. In this particular neighborhood, they're building custom homes for specific buyers, but are also building a few "spec" homes here and there - the subdivision is almost done and they mentioned that they're ready to be done. Fortunately, the housing market is still pretty healthy where we are and this particular suburb and even more specifically, the subsivision is still selling well, so the builder told us directly that they're not too strict about the pre-approvals (i.e. they allow conditions) because they're comfortable with their ability to sell the home, even if we fall through for some reason.

 

I'e spoken with multiple different LOs recently and the consensus is, yes, the SL charge-offs with balances are a challenge, but all things considered, if I am in a payment plan on them and I pay on that plan until the house is finished (next 8 months) then approval in time for closing should be very do-able.

 

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 9 of 13
ShanetheMortgageMan
Super Contributor

Re: 640 is the new 620 for FHA - Wells and BOA raise requirementst

Sounds like with the builder being flexible, and the lenders you've spoken to, you'll have this pre-approval thing nailed down when the time comes.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 10 of 13
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