Call 866.364.6720
Checking credit scores remains essential for any home purchase. FHA loans, including 203k loans, typically offer more leeway for lower credit scores than private bank financing does. The guidelines change often, but RenovationReady™ lending partners can assist with the latest recommendations on credit score qualifications.
Typically, a 203k loan is predicated on a credit score of at least 640, although some lenders might offer a package to someone with a 620 score.
Compare that to a traditional mortgage, where 620 is considered a borderline subprime loan – riskier, with a high interest rate, and hard to get in today's housing economy.
The annual CoreLogic U.S. Housing and Mortgage Trends report released in Feb. 2011 found that 60 percent of conventional mortgages went to people with credit scores of at least 780 – approaching perfection. That's compared to only 25 percent with such high credit scores in 2005.
Meanwhile, FHA will accept 580 for a loan, although that will likely trigger a larger down payment requirement.
No matter the loan package, a lower credit score still means a homeowner will likely pay out more in the long run, since the government, like other lenders, assumes more risk with borrowers who have lower scores. That increased risk is generally demonstrated through increased interest rates.
For some, a few credit score points are all that stand between a lower down payment or significantly lower interest rates – moving from 688 to 705, for example, can make a difference. Paying off a small bill, or making a large payment on outstanding debt like a credit card to lower your debt-to-income ratio, can be all it takes. Consult with RenovationReady™ to find the best path to homeownership for your family.
http://www.bankrate.com/finance/financial-literacy/how-credit-scores-affect-mortgage-rates-1.aspx
Have questions? Learn more about how RenovationReady™ helps homebuyers and homeowners navigate the renovation process.
