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Qualifying for mortgage

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Kerrybabe
New Visitor

Qualifying for mortgage

I need to be able to obtain a conventional loan for a mortgage which requires a 620 or better score. A soft pull last month showed me at a 595. Since then, my fico 8 score has change 653 Eq 645 Tu and 626 Ex. I noticed that my FICO for mortgage hasn't changed, so I want to know what my new potential mortgage scores will be since my fico 8 has increased. What are the differences in numbers between fico 8 and the models used for mortgage lending. 

Message 1 of 6
5 REPLIES 5
ShanetheMortgageMan
Super Contributor

Re: Qualifying for mortgage

A 620 credit score is usually the minimum for Fannie Mae & Freddie Mac conventional financing, but just getting to a 620 score doesn't mean you'll be approved.  Your loan still has to pass what is called automated underwriting, which is a computer program that analyzes your entire borrowing profile - credit scores, credit history, debt-to-income ratio, down payment percentage, employment history, employment type (self-employed or W-2'd) and how much money you'll have leftover after you close (called "reserves").  It's definitely possible for someone with a 620 score to obtain an automated underwriting approval through Fannie Mae or Freddie Mac, but these systems have tightened up lately so someone will probably need some significant compensating factors - meaning larger down payment, lower debt-to-income ratio and/or significant reserves.  

 

Someone with a 620 score would have a higher chance of getting approved for an FHA loan, although FHA loan limits don't go as high as conventional loan limits.  You can look up county-by-county FHA loan limits at https://entp.hud.gov/idapp/html/hicostlook.cfm.

 

Is there a specific reason you are looking for conventional financing?

 

Even though Fannie Mae & Freddie Mac are the most popular forms of conventional financing, there are other types of conventional mortgages that do not require automated underwriting.  These programs have higher down payment requirements that scale with credit scores, i.e. someone with a 740 could get away with putting just 5-10% down whereas someone with a 620 score would have to put closer to 20% down.


As far as the credit score differences, from doing mortgages for over 22 years I've noticed that the FICO 8 scores usually are a little higher than the mortgage scores (FICO 5/4/2), but everyone's score difference won't be the same.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Mortgage Loan Officer located in Southern California and lending in all 50 states
Message 2 of 6
Kerrybabe
New Visitor

Re: Qualifying for mortgage

I already have an FHA loan so I'm not eligible to take another one, hence going the route of a conventional loan. 

Message 3 of 6
ShanetheMortgageMan
Super Contributor

Re: Qualifying for mortgage

There are 4 scenarios where you can have more than FHA loan:

  1. Relocating over 100 miles away for an employment related reason 
  2. Increase in family size to where your current home fails to meet family needs
  3. Vacating a jointly owned property (like in a divorce, for example)
  4. You were a co-signer on someone else's FHA mortgage and now want to get one of your own (or vice versa)

If your situation doesn't meet any of those then conventional financing might be your only option.  How much % are you planning on putting down?

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Mortgage Loan Officer located in Southern California and lending in all 50 states
Message 4 of 6
Kerrybabe
New Visitor

Re: Qualifying for mortgage

My elderly father is moving with me within a year, we're currently a family of four, will be five once my father joins us. I'm not sure if that qualifies since it's a year out.

If that's not a qualifying situation, I will be putting down 10%.

Message 5 of 6
ShanetheMortgageMan
Super Contributor

Re: Qualifying for mortgage

The full requirements of that carve out are:

 

• the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and
• the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.

 

I've run this by HUD before and they've said they require evidence of increased dependents.  With a newborn that is easy to document but when an elderly family member/parent is moving in it's a little more challenging.  Underwriters usually like to see the tax return with the increase of claimed dependents, but we've also had them approved when someone has moved in prior to that year's tax returns being filed.  Someone moving in in the future would be tough, but if there is a clearly defined event that will document their future move in date it would be worth a shot to try.  You also need to have at least 25% equity in the current property, documented by an appraisal.

 

10% down would help a 620 score with an automated underwriting approval, but you'll only know after credit is checked and automated underwriting is run by the LO.

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