FHA Credit Score
08 Feb

FHA Credit Score

One thing that will always be important now and in the future, is your FICO credit score and overall credit history whether you are buying a home or a new car, your credit profile will be evaluated initially to determine credit worthiness. Yes, this is only a number but a number that represents your strength as a borrower and if you will satisfy loan program guidelines in order to obtain a mortgage.

Whether you are looking for your FHA Credit Score to determine your FHA loan possibilities, you need to make sure you are working with a mortgage professional at Mortgage Scenarios. Here at Mortgage Scenarios we only employ the best of the best loan professionals who know the guidelines of all mortgage programs inside and out and we can determine your FHA Credit Score and let you know if home ownership is in your future.

Upon working with Mortgage Scenarios you will complete the loan application and after this, we will be able to pull your credit report which will let us in on your FHA Credit Score which will be used to determine your loan approval. Now with FHA Loans, your FHA Credit Score isn’t just used to determine loan eligibility, but FHA guidelines also makes the down payment requirements and debt to income ratios dependent on this FHA Credit Score.

As with most cases, you will see that the need for a higher FICO credit score can go a long way in letting you qualify with the least restrictive FHA guidelines.

Down Payment And Debt To Income Ratio

To illustrate the previous point made regarding FHA Credit Score, let’s look at how this credit score pertains to down payment and debt to income ratio.

  • Down Payment
    • FICO Credit Score 580+ = 3.5% Down Payment
    • FICO Credit Score 500 – 579 = 10% Down Payment

As you can see your FICO credit score makes all the difference when determining the amount of down payment needed in order to get your loan approval. If you do not have a 580+ credit score, you are going to be forced to come up with at least an additional 6.5% of the purchase price in the form of a down payment. Also, if you are in the 500 – 579 credit score range you might be required to show additional compensating factors to get a loan approval which could include additional assets or cash.

  • Debt to Income Ratio
    • FICO Credit Score 620+ = 56.9%
    • FICO Credit Score Under 620 = 43%

As seen here, with your FHA Credit Score under 620 you will be forced to abide by FHA guidelines on debt to income ratio that is 13.9% less than if you had a 620+ credit score. Let’s say for example you have $5,000 in gross monthly income, a 13.9% reduction in debt to income ratio will result in losing $695 in monthly debt to use as a borrower. This $695 can total half of your proposed mortgage payment so the quest to keep a higher FHA Credit Score is key when trying to get the best guidelines from your FHA Loan.

FHA Loans have some of the most lenient guidelines, but in order to use them, you are going to need to make sure your FHA Credit Score is 620+ to see the full benefits of the guidelines. With this 620+ credit score you are going to be able to put less money down and qualify with more monthly debt than with a lower credit score.

Now just because you don’t have an optimal credit score doesn’t mean we can’t get you into an FH Loan. If you have gotten denied in the past then you need to work with one of our professionals today so that we can let you know what your options are and how we can make you a home owner where other lenders fell short.

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