Mortgage Loans & Your Credit

Looking to buy a home? Have you already applied for but been rejected for a mortgage loan? If so, you probably already know that most conventional lenders want mortgage borrowers to have a credit score of at least 620 to qualify for a mortgage. This is a blanket statement, which is important to keep in mind because different lenders will have different lending thresholds and people with lower credit scores may still qualify for some specialized lending programs. However, for the majority of people, qualifying for a mortgage loan means that you need good or exceptional personal credit. Which for some people means a mortgage credit repair.

What you may not know is that people do not have one credit score. There are three major credit bureaus in the United States: Experian, Equifax, and TransUnion. While it is likely that the scores reported by each agency will be close to each other, there can be a spread of points between the different agencies, which could lead to mortgage declines, depending on the agency used by your lender.

Is My Credit Score High Enough?

While 620 is the average number, it may not be high enough, depending on the type of loan you are seeking. For most conventional loans, which conform to standards set by Fannie Mae and Freddie Mac, the bottom threshold for loans varies from 620 to 660, depending on the loan terms and the lender. For jumbo loans, many banks require a credit score of at least 700. FHA loans require a minimum score of 500 if you have a 10% down payment or 580 with a 3.5% down payment. VA loans may be insured by the U.S. Department of Veterans Affairs, but lenders who service them generally still require a 620 score. USDA loans usually require a 580 minimum score, though some lenders may provide loans to people with lower credit scores.

Of course, getting a mortgage and getting an affordable mortgage is not the same thing. Creditworthiness impacts the interest that you pay. This makes a huge difference in most loans, but in a mortgage, the difference between an excellent credit score and a fair one can mean 100s of 1000s of dollars over the life of the loan. However, because mortgage lenders also look at the down payment you have available, your cash assets, and your debt-to-income ratio, you may not want to spend all available money to pay down loans and improve your credit score.

Mortgage Credit Repair Solutions

If you are considering purchasing a home, we strongly suggest checking your credit beforehand. If you have been declined for a mortgage loan, this is going to show up as an inquiry on your credit report, which will only reduce your credit even further. Taking the first step of checking your credit beforehand can alert you to the existence of any negatives on the report. Not sure what to do about them? At Emerald Credit Solutions, we can help. We examine your entire credit report, look at the negatives, and then analyze what you need to do in order to neutralize them.

A simple step you can take is to request a free credit report and look over it for errors. You may be surprised to learn that almost 80% of credit reports contain errors. Not sure how to get them removed from your report? Emerald Credit Solutions offers several tiers of credit repair services, all of which include disputing errors on your credit report.

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