**In most situations, it’s not the credit score itself that would get you denied for a home mortgage, but rather what is listed on your credit report.** Keep in mind that credit is only 1 of many factors lenders evaluate to qualify a borrower for a mortgage.
**Interestingly enough, it can be possible to obtain a mortgage with NO credit score at all.** This doesn't mean that we don't pull your credit report and just don't see it. It means we pull your credit report and the credit bureaus tell us that you don't have a score to report. Be aware that other factors will usually apply in this situation. Some of those things might include: a larger down payment, documentable rental history, and a history showing other bills were paid on time.
For most loan programs, there isn't an actual minimum credit score. However, lenders, investors, and mortgage insurance companies may have different overlays (essentially rules we are required to follow) based on the amount of risk they are willing to take. One of those overlays can be a minimum required credit score. This isn't considered unfair or discriminatory as long as you have the same set of rules for everyone. The higher the credit score, the better terms you will typically receive (interest rate, pricing on mortgage insurance, etc.). However, credit score isn't the only thing that plays into the loan terms that you receive.
Here are situations that might hurt your credit score, but might not hurt your ability to get a home mortgage:
- A one-off late payment on consumer debt (credit card, car loan, personal loan)
- Medical Collections
- Past Consumer Late Payments that are now caught up and at least one year old (credit cards, car loans, student loans)
Here are some, not all, situations where getting a home mortgage could be extremely difficult:
- Currently in a chapter 7 bankruptcy that has not been discharged (there are different rules for chapter 13) or the elapsed time since discharge doesn’t meet underwriting guidelines.
- Currently going through a foreclosure (this would mean the house is still in your name), short sale, or currently being behind on your mortgage, or the elapsed time since completion of the foreclosure doesn’t meet underwriting guidelines.
- Having a judgement for unpaid child support that you are not in a repayment plan for
- Having a tax lien/judgement against you
- Large collections (usually several thousand in total) for items that are not medical
Generally, here are the credit scores I see from borrowers that qualify for a mortgage and what type of mortgage those borrowers use to purchase their home:
580-640 – FHA or VA (A score within this range is much more limiting on who you can obtain a loan from, due to investor/ company overlays).
640-700 - FHA, VA, USDA, with down payment assistance options
680+ - Conventional, VA, USDA, with down payment assistance options
700+ - Typically, a score this high would be required for Jumbo loans and Home Equity Lines of Credit
Kait Spurrier
Sr. Mortgage Banker
NMLS# 1277963
O: (410) 794-4127
kspurrier@apexhomeloans.com
apexhomeloans.com/kait-spurrier
Topics: Mortgages for Millennials, Mortgages for Millennials: Credit Scores
