Posts Tagged ‘minimum credit scores’

Conventional and FHA loans revisited

January 8, 2010

In 2008, I released a series of posts comparing the pros and cons of conventional and FHA loans.  If you haven’t noticed, a lot has changed in the last couple of years.

On that note, I thought it wise to make note of new guidelines and highlight some changes to existing guidelines for both conventional and FHA loans. For reference, I will also provide links back to the original posts from April to June 2008.

Minimum credit score requirements (click here for the original post):

  • Lenders now require a 620+ credit score for FHA loans (a 660+ credit score for some programs). Credit scores between 620-660 may see a slightly increased interest rate.  – this is a change from no minimum credit score requirements
  • Conventional loans also require a minimum credit score of 620+, but interest rates for scores under 680 see a noticeably higher interest rate. – this is a change from possible approval below 620 and higher rate adjustments occurred below 620.

Credit history requirements (new requirement):

  • Brand new – FHA loans now require borrowers to have at least three active OR recently closed trade lines (accounts) in their credit history.  See this recent post for more details.
  • Conventional loans do not have this requirement.

Minimum down payment requirements (click here for the original post):

  • FHA loans require a minimum down payment of 3.5% regardless of the credit score. – change from 3%
  • FHA down payment assistance programs are no longer allowed.
  • Conventional loans require a minimum down payment of 5% and a 680+ credit score in order to obtain Private Mortgage Insurance.  – no change in the amount needed down, but the minimum credit score requirement is new
  • If a borrower’s credit score is below 680, then a 20% down payment will be required on conventional loans.

Private Mortgage Insurance (click here and here for original posts):

  • FHA loans still require an up front Mortgage Insurance Premium fee of 1.75% of the loan amount. The fee is rolled into the loan amount. – change from 1.5% up front fee
  • FHA monthly mortgage insurance payments are still lower than conventional loans.
  • Conventional loans do not have an up front fee, which is why their monthly premiums are higher than FHA loans.

The last couple of years haven’t changed the overall differences between FHA and conventional loans.  They have however tightened up the qualifying guidelines making planning ahead crucial. If you are looking to buy (or refinance) a home in the next 6-12 months, give me a call to help ensure you everything is in order when you make an offer on a home.

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Holding onto the past

October 29, 2009

The past can hold a lot of great memories… birthdays, wedding day, graduation, one’s favorite TV show that was cancelled by FOX… OK, that last one was a personal example, but you get the idea.

Some people I talk to still reminisce about the “good old days” of buying a home when it was easy to get financing. By fixating on that thought, one may begin to believe that no one can get financing now. That is simply not true!

Banks are still lending money, but they now prefer “safer and more predictable” loans (in other words, fixed financing) instead of the no doc, stated income/stated asset, subprime, etc. programs that helped usher in the current financial crisis we are all struggling through.

Borrowers can still qualify to buy homes with little money down, less than average credit, and can choose from a variety of loan programs. Some examples:

  • Borrowers only need 620 credit score to qualify for an FHA loan
  • A down payment as little as 3.5% can get someone into a home with an FHA loan (5% for a conventional loan)
  • Some foreclosed homes are eligible to be bought with only $100 down, and still others are available with no money down
  • Adjustable Rate Mortgages (ARMs) are also available with as little as 5% down
  • Interest Only ARMs do exist, but the down payment requirement is now 20%

If you are looking to buy or refinance your current home, get in contact with me. We can discuss “how things were” vs. “how things are” and make sure you are ready to move forward with your next loan.

Sometimes it is just best to let go of the past no matter how tough it may be… If we stay in the past, we might miss out on the best buyers market (low rates and lower home values) in years.

One might also miss out watching an actor from their favorite TV show star in his new show on ABC.  If that were true for me, I would have missed this great Halloween episode moment when he paid tribute to his character from the cult TV show FOX cancelled 5 years ago – Malcolm Reynolds from “Firefly”. Enjoy!

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