What Determines Your Mortgage Application?

What Determines Your Mortgage Application?

What Determines Your Mortgage Application?

When it comes to your ability to buy a home, your credit score determines what kind of mortgage, if any at all, you qualify for. 

What credit score do you need in order to get a mortgage or home loan? This is a tricky question to answer because those borrowers must follow both official and unofficial guidelines. Lenders usually pull a fusion of three credit scores and usually use your median score to determine what kind of mortgage you qualify for.

“Official” Credit Scores

FHA – Loan requirements are set by federal law. Applicants must have a credit score of at least 500 to be eligible. Scores between 500 and 579 are required to make down payments of 10 percent.

VA and USDA – The VA does not set a minimum credit score, rather it takes a look at your profile and makes an underwriting determination. Things like 30-day late payments, bankruptcy or foreclosure, and collections amounts are considered “unacceptable.”

Fannie Mae & Freddie Mac – These are government-sponsored enterprises (GSEs) that purchase mortgages and sell them to investors. The investors then sell them to borrowers under strict guidelines. Borrowers must have a score of at least 620 to qualify for these mortgages.

The Real World

After bankers and Wall Street took advantage of the laws that led to the recession of 2008, many lenders wish not to lose their approval to fund GSE loans. To protect themselves, they create guidelines that are tougher than the minimum required by the law. This decreases their chances of having to buy back loans and lose money overall.

For all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California, contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. We have the experience needed to make sure you get the right mortgage.