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Minimum Credit Score – Part 1

I receive a fair amount of calls asking the same question regarding credit score and what is the minimum score requirement.  If you are in search for this answer and have received several different answers, then read on...

Minimum Credit Score

You may find yourself asking several different mortgage lenders or banks this same question:  What is the minimum credit score requirement to get a loan?  
Unfortunately for the borrower, there is no one straight answer for this and requires some discussion.  First off, every lender will have different score requirements.  This is very common and it varies from lender to lender depending on who they sell their loans too.  Each investor will have different guidelines depending on what level of risk they are willing to tolerate.  The lower your credit score is as a borrower, the riskier you are to lend money too.  That is just a simple fact. 

Additionally, it also matters why you are purchasing the home and how much money you want to put down on the home.   Are you purchasing the home as your primary residence, is it a vacation home or 2nd home or are you buying this house as a rental/investment home? 

Let's take for example, that you are buying the home as a primary residence using FHA financing with the low 3.5% down payment.  If the home your are purchasing is a primary residence then there is a possibility that you can be approved for an FHA loan with a Mid credit score of 620.  However, you are not automatically approved just because you have the 620 Mid Score.  To be eligible to use the low 620 credit score, you must also be able to show the following:

  1. You must not have had ANY collections hit your credit report within the last 12 months.  The only exception to this are medical collections.
  2. You cannot have any bankruptcies, foreclosures, short sales, judgments or liens hit your credit report within the last 36 months (3 years)
  3. You must be able to prove 12 months of on time rental history either through your rental's management company or by 12 months of cancelled rent check or both

If the above cannot be accomplished in its entirety, then you must have a minimum 640 Mid Credit Score for an FHA loan.   

1 comment on “Minimum Credit Score – Part 1”

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