What credit score do you need for a mortgage?

There’s no universal minimum credit score needed for a mortgage, but a better credit score will give you more options.

If you’re trying to get a mortgage, your credit score matters. Mortgage lenders use credit scores — as well as other information — to assess your likelihood of repaying a loan on time.

Because credit scores are so important, lenders set minimum scores you must have in order to qualify for a mortgage with them. Minimum credit score varies by lender and mortgage type, but generally, a higher score means better loan terms for you.

Let’s look at which loan types are best for different credit scores.

Credit score needed to buy a house

Mortgage lending is risky, and lenders want a way to quantify that risk. They use your three-digit credit score to gauge the risk of loaning you money since your credit score helps predict your likelihood of paying back a loan on time. Lenders also consider other data, such as your income, employment, debts and assets to decide whether to offer you a loan.

Different lenders and loan types have different borrower requirements, loan terms and minimum credit scores. Here are the requirements for some of the most common types of mortgages.

Conventional loan

Minimum credit score: 620

A conventional loan is a mortgage that isn’t backed by a federal agency. Most mortgage lenders offer conventional loans, and many lenders sell these loans to Fannie Mae or Freddie Mac — two government-sponsored enterprises. Conventional loans can have either fixed or adjustable rates, and terms ranging from 10 to 30 years.

You can get a conventional loan with a down payment as low as 3% of the home’s purchase price, so this type of loan makes sense if you don’t have enough for a traditional down payment. However, if your down payment is less than 20%, you’re required to pay for private mortgage insurance (PMI), which is an insurance policy designed to protect the lender if you stop making payments. You can ask your servicer to cancel PMI once the principal balance of your mortgage falls below 80% of the original value of your home.

FHA loan

Minimum credit score (10% down): 500

Minimum credit score (3.5% down): 580

FHA loans are backed by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD). The FHA incentivizes lenders to make mortgage loans available to borrowers who might not otherwise qualify by guaranteeing the federal government will repay the mortgage if the borrower stops making payments. This makes an FHA loan a good option if you have a lower credit score.

FHA loans come in 15- or 30-year terms with fixed interest rates. Unlike conventional mortgages, which only require PMI for borrowers with less than 20% down, all FHA borrowers must pay an up-front mortgage insurance premium (MIP) and an annual MIP, as long as the loan is outstanding.

VA loan

Minimum credit score: N/A

VA loans are mortgages backed by the U.S. Department of Veterans Affairs (VA). The VA guarantees loans made by VA-approved lenders to qualifying veterans or service members of the U.S. armed forces, or their spouses. This type of loan is a great option for veterans and their spouses, especially if they don’t have the best credit and don’t have enough for a down payment.

VA loans are fixed-rate mortgages with 10-, 15-, 20- or 30-year terms.

Most VA loans don’t require a down payment or monthly mortgage insurance premiums. However, they do require a one-time VA funding fee, that ranges from 1.4% to 3.6% of the loan amount.

USDA loan

Minimum credit score: N/A

The U.S. Department of Agriculture guarantees loans for borrowers interested in buying homes in certain rural areas. USDA loans don’t require a minimum down payment, but you have to meet the USDA’s income eligibility limits, which vary by location.

All USDA mortgages have fixed interest rates and 30-year repayment terms.

USDA-approved lenders must pay an up-front guarantee fee of up to 3.5% of the purchase price to the USDA. That fee can be passed on to borrowers and financed into the home loan. If the home you want to buy is within an eligible rural area (defined by the USDA) and you meet the other requirements, this could be a great loan option for you.

What else do mortgage lenders consider?

Your credit score isn’t the only factor lenders consider when reviewing your loan application. Here are some of the other factors lenders use when deciding whether to give you a mortgage.

• Debt-to-income ratio — Your debt-to-income (DTI) ratio is the amount of debt payments you make each month (including your mortgage payments) relative to your gross monthly income. For example, if your mortgage payments, car loan and credit card payments add up to $1,800 per month and you have a $6,000 monthly income, your debt-to-income ratio would be $1,800/$6,000, or 30%. Most conventional mortgages require a DTI ratio no greater than 36%. However, you may be approved with a DTI up to 45% if you meet other requirements.
• Employment history — When you apply for a mortgage, lenders will ask for proof of employment — typically two years’ worth of W-2s and tax returns, as well as your two most recent pay stubs. Lenders prefer to work with people who have stable employment and consistent income.
• Down payment — Putting money down to buy a home gives you immediate equity in the home and helps to ensure the lender recoups their loss if you stop making payments and they need to foreclose on the home. Most loans — other than VA and USDA loans — require a down payment of at least 3%, although a higher down payment could help you qualify for a lower interest rate or make up for other less-than-ideal aspects of your mortgage application.
• The home’s value and condition — Lenders want to ensure the home collateralizing the loan is in good condition and worth what you’re paying for it. Typically, they’ll require an appraisal to determine the home’s value and may also require a home inspection to ensure there aren’t any unknown issues with the property.

How is your credit score calculated?

Most talk of credit scores makes it sound as if you have only one score. In fact, you have several credit scores, and they may be used by different lenders and for different purposes.

The three national credit bureaus — Experian, Equifax and TransUnion — collect information from banks, credit unions, lenders and public records to formulate your credit score. The most common and well-known scoring model is the FICO Score, which is based on the following five factors:

• Payment history (35%) — A history of late payments will drag your score down, as will negative information from bankruptcies, foreclosures, repossessions or accounts referred to collections.
• How much you owe (30%) — Your credit utilization ratio is the amount of revolving credit you’re using compared to your total available credit. For example, if you have one credit card with a $2,000 balance and a $4,000 credit limit, your credit utilization ratio is 50%. Credit scoring models view using a larger percentage of your available credit as risky behavior, so high balances and maxed-out credit cards will negatively impact your score.
• Length of credit history (15%) — This factor considers the age of your oldest account, newest account and the average age of all your credit accounts. In general, the longer you’ve been using credit responsibly, the higher your score will be.
• Types of accounts (10%) — Credit scoring models favor people who use a mix of credit cards, installment loans, mortgages and other types of credit.
• Recent credit history (10%) — Lenders view applying for and opening several new credit accounts within a short period as a sign of financial trouble and it’ll negatively impact your score.

Ready to shop around for a mortgage?

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

https://kentuckyloan.blogspot.com/

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Credit Score Information For Kentucky Home buyers

Credit Scores are important for getting approved for a Mortgage in Kentucky.

Credit Score Requirements for FHA, VA, USDA and Conventional Loans in Kentucky

Below I have spelled out some info that will help you out when you look at your credit scores and what affects them and what you can do to help your credit scores in order to prepare for a mortgage loan approval when it comes to your credit scores.

1. Opting out will help a credit score.
   No it won’t. The bureaus don’t know if someone has opted out or not and it’s not factored into the credit scores. If someone’s score improves after they have opted out it’s because something else has changed on the report but not because they opted out.
2. Paying off old delinquencies will remove them from your credit report.
   No a collection account or an account with late payments will stay on a credit report for 7 years. That being said, the credit bureaus will occasionally go in and remove old collections that have not reported for a while. But that’s at their discretion. Just because you paid if off doesn’t mean it will be removed. Also paying off an older collection with then brings the reporting date current which could actually hurt the credit scores.
3. All rate shopping inquiries are the same.
   If you are rate shopping for a mortgage or auto, all inquiries with Trans Union and Equifax have a 45 day window. For Experian however it’s only 15 days. For revolving inquiries there is no “shopping” period. All those inquiries are counted no matter what the time frame is.
4. Opening new accounts will help your credit score.
   This will help only if the borrower has no established credit yet. Once you have several accounts, opening new ones will actually have a negative affect on a credit score until substantial history is accumulated on the account.
5. Paying off all your revolving balances is a good thing!
   Actually no it’s not. The credit bureaus models like to see at least one revolving balance, even if it’s small. Having no revolving balances can actually have a negative impact on a credit score. So always keeping one account with a small balance is a very good idea.
6. Your credit is affected by how much money you have in your savings or checking accounts.
   Neither of these are factored into a credit score.
7. Closing old accounts will help a credit score.
   The credit scoring models like to see several open accounts that have zero balances and are not used often. When an account is closed you lose that history. If it’s an account you’ve had for a long time and has no late payments, closing it can actual hurt the credit score. Having several open accounts, even if they are not used much, makes it look like a person has good financial responsibility.
8. When I check my own credit score it’s the same one used by lenders.
   Unfortunately no it’s not. A person actually has 69+ different credit scores. The ones that lenders use are completely different than what a borrower sees when they get their own scores. Those are personal scores and are not used by any industry for any reason.
9. Checking my own credit report will hurt my score.
   When a consumer checks their own credit report it’s a “soft” inquiry and will not impact the scores. Only “hard” inquiries done by creditors when a consumer applies for a loan or credit card will possibly have a negative affect on a credit score.

It’s  possible to avoid paying for your credit score or at least an estimate. Here is a list of all of the well-known ways to get a FICO score or score estimate for free:

Free FICO credit scores:

• Discover Free Credit Scorecard (Experian, FICO-08)
• freecreditscore.com (Experian, FICO-08) — you do not need to give your credit card number

For free estimates of your credit score estimates and credit monitoring:

• Credit Karma (TransUnion, Equifax)
• Credit.com (Experian)
• Mint (Equifax)
• Chase Credit Journey (TransUnion)

Also see the Wikipedia page on free credit report websites.

Credit cards (no annual fee) that offer a free FICO score with their monthly statement or online:

• Amazon Synchrony Store Card (TransUnion, FICO-08)
• American Express (Experian, FICO-08)
• Bank of America Cards (TransUnion, FICO-08)
• Barclaycards including the Sallie Mae Mastercard (TransUnion, FICO)
• Branded Citibank cards (Equifax, FICO-08)
• Chase Slate (Experian, FICO)
• Discover cards (Transunion, FICO-08)
• FNBO Cards (Experian, FICO-08 Bankcard)
• Walmart Store Card (TransUnion, FICO)
• Wells Fargo Cards (FICO)

Deposit accounts that offer a free FICO score with their monthly statement:

• Digital Credit Union (EQ-05: Mortgage Score)

Credit cards (no annual fee) that offer a free estimated credit score online:

• Capital One credit cards (TransUnion, VantageScore 3.0)

Note that score ranges vary between FICO scores and other scores:

• FICO: 300 to 850 (used in 85-90% of credit decisions)
• VantageScore (used in 10-15% of credit decisions)
  • VantageScore pre-3.0: 501 to 990
  • VantageScore 3.0: 300 to 850
• TransUnion New Account Score: 300 to 850 (score estimate)
• Equifax: 280 to 850 (score estimate)
• Experian: 330 to 830 (score estimate)

 

—

 

 

 

Joel Lobb (NMLS#57916)
Senior  Loan Officer

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

 

Text/call 502-905-3708
kentuckyloan@gmail.com

 

 

 

 

If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.

Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/

— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

 

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Score Requirement on Kentucky FHA Loans for people with bad credit
Lowers Minimum Credit Score Requirement on Kentucky FHA Loans

Kentucky FHA Home loan programs for people with bad credit

FHA loans are designed to make housing more affordable with lower down payment requirements than conventional loans on purchases and less home equity requirements on refinances. Less stringent qualification guidelines and the security of a government-insured loan makes FHA a popular choice for consumers.

Kentucky FHA Loans with 580 Credit scores and – Low Down Payment – 3.5% which can be gifted from relatives or borrowed off one’s retirement account. If your scores is between 500-579, 10% down needed for home loan and subject to underwriting approval.

https://apps.elfsight.com/p/platform.js

 

Which Credit Score is used for a Kentucky Mortgage Loan Approval?
Credit score used for a Kentucky Mortgage Loan Approval for FHA, VA, USDA Rural Housing, KHC Down payment assistance FAnnie Mae

FICO Scores used for mortgages

KHC Loan Programs

KHC is increasing the down payment assistance program amount from $6,000 to $7,500. This is for both Regular Down Payment and for Affordable Down Payment assistance programs 2. The interest rate on the repayment of the down payment assistance will go from 5.5% to 3.75%. (Affordable Down Payment assistance will remain at 1%) Realtors: We are here to help you and your clients take advantage of these great opportunities. Buyers: We are here to answer questions you have regarding this program and qualification requirements. KHC is used for mostly applicants in Kentucky that don’t have access to money for a down payment on their home. ​​​​KHC recognizes that down payments, closing costs, and prep​aids are stumbling blocks for many potential home buyers. Here are several loan programs to help. Regular DAP Purchase price up to $346,644 with Secondary Market. Assistance in the form of a loan up to $7,500 in $100 increments. Repayable over a 10-year term at 3.75 percent. Available to all KHC first-mortgage loan recipients. Affordable DAP Purchase price up to $346,644​ with Secondary Market. Assistance up to $7,500. Repayable over a 10-year term at 1.00 percent. Borrowers must meet Affordable D​AP income limits. ​More About Down Payment and Closing Costs No liquid asset review and no limit on borrower reserves. Specific credit underwriting standards may apply to down payment programs.​ ​MORE ABOUT DOWN PAYMENT AND CLOSING COSTS No liquid asset review and no limit on borrower reserves. Specific credit underwriting standards may apply to down payment programs Down Payment Assistance Programs! This is great news for buyers in Kentucky!

KHC Loan Programs.

• KHC is increasing the down payment assistance program amount from $6,000 to $7,500. This is for both Regular Down Payment and for Affordable Down Payment assistance programs

  2. The interest rate on the repayment of the down payment assistance will go from 5.5% to 3.75%. (Affordable Down Payment assistance will remain at 1%)

  Realtors: We are here to help you and your clients take advantage of these great opportunities.

  Buyers: We are here to answer questions you have regarding this program and qualification requirements.

  KHC is used for mostly applicants in Kentucky that don’t have access to money for a down payment on their home. 

  ​​​​KHC recognizes that down payments, closing costs, and prep​aids are stumbling blocks for many potential home buyers. Here are several loan programs to help.

  Regular DAP

  • Purchase price up to $346,644 with Secondary Market.
  • Assistance in the form of a loan up to $7,500 in $100 increments.
  • Repayable over a 10-year term at 3.75 percent.
  • Available to all KHC first-mortgage loan recipients.

  Affordable DAP

  • Purchase price up to $346,644​ with Secondary Market.
  • Assistance up to $7,500.
  • Repayable over a 10-year term at 1.00 percent.
  • Borrowers must meet Affordable D​AP income limits.

  ​More About Down Payment and Closing Costs

  • No liquid asset review and no limit on borrower reserves.
  • Specific credit underwriting standards may apply to down payment programs.​

  ​MORE ABOUT DOWN PAYMENT AND CLOSING COSTS

  • No liquid asset review and no limit on borrower reserves.
  • Specific credit underwriting standards may apply to down payment programs

Here are several loan options for borrowers who don’t have a large down payment.

FHA loan. FHA loans typically require a 3.5 percent down payment, but that can go up to 10 percent if you have a poor FICO Score (500-579). You’ll have to pay upfront and annual mortgage insurance, regardless of how much you put down. The U.S. Department of Housing and Urban Development (HUD) has a searchable database where you can find FHA-approved lenders in your area.

VA loan. If you’re eligible for a VA loan, you’re in luck. VA loans don’t require any down payment from the borrower, they don’t charge mortgage insurance AND they have no minimum credit score requirement. But (there’s always a but!) VA loan holders will have to pay a funding fee, which can range from 1.25 to 2.4 percent of your loan amount.

HomeReady. Fannie Mae’s HomeReady mortgage program requires a minimum 3 percent down payment and comes with mortgage insurance. But you can get rid of the mortgage insurance obligation once your loan-to-value ratio falls below 78 percent. You don’t need stellar credit either — they accept borrowers with a FICO Score of 620 or greater. Because they’re backed by Fannie Mae, HomeReady loans also allow borrowers to use other sources of funding for their down payment, like a gift from family or friends.

USDA loan. If you’re set on living in a rural area, you may be eligible for a USDA mortgage loan. Generally, they classify any area with fewer than 10,000 to 20,000 residents as rural, but to be safe check out their property eligibility map. No down payment is required, and there’s no ongoing mortgage insurance fee, but you do have to pay a 2 percent upfront fee. Typical credit score requirements are 620 to 640 minimum. Borrowers also can’t have prior foreclosures, bankruptcies or major delinquencies in the past several years.

Income Documents Needed for A Kentucky Mortgage Loan Approval.

What Income docs do you need?

Income Type:

Social Security Awards letter (Current Year)

Prior 1099’s
To Determine if you can gross up (Follow Product guide-FHA/Conv. Etc)
and review 1040 Tax return Line 5.. 5A will show non taxed income and
5B will show taxable portion – you can only gross up non taxable
Pension Benefits Letter – Must show Minimum 3 year continuation – most will be lifetime -letter must state lifetime or other timeframe
2 years W2’s

Self Employed:

2 Years 1040’s with all schedules (These are your personal tax returns).
The tax returns will tell you what other documents are needed
1040 – Page 1 Line 7 will tell you if there is any W2 income.

Self employed
people also pay themselves w2 income often. You will need all w2’s that
when added up match the $ amount entered on line 7 of the 1040
Line 7A will tell you if there’s other income. The income details will be
farther indicated on Schedule 1

Schedule 1 Line 2A show alimony received
Line 3 indicates if there is a Schedule C (Sole Proprietors or single person
LLC’s)
Line 5 is for Schedule E which is either Business (LLC/SCorp/Corp) or
Rental income- It could be both if borrower owns rental property and
businesses.

Schedule E The totals on all schedule E’s should add up to match the $ on Schedule
1. If the total on one of the schedules doesn’t match you know there are
others
On Schedule E Part II Box 28 you will see business name. If the business
name is duplicated on multiple lines it’s because both parties on the tax
filing have ownership in the business.

Check to confirm the Tax ID (FEIN)
is the same on both lines. If it’s different it indicated multiple companies.
Box 28B will have a P or S

P = LLC (Partnership) which is filed on a 1065 partnership return of if
owned by one person can be filed on a Schedule C in the personal 1040
Tax return. If the return is Filed on 1065 there will be a K1 which will
show the % of ownership. If they own 25% or more you will need the 2
years returns. (Assuming not single person partnership filed on 1040

Schedule C – There is no K1 on the Schedule C) if they advise that they
own less than 25% on a 1065 you’ll just need the K1 from the 1065 to
support that. If there are multiple partners there must be a 1065 filing

S = SCorp or Corporation which is filed on an 1120S for the S Corp or an
1120 for a Corporation. On the 1120S you will have a Schedule K1 which
will show the % of ownership. If they own 25% or more you will need 2
year full returns. If they advise that they own <25% the K1 will show their
shares. The 1120 will not have K1’s, the income just flows thru to the
personal returns. We don’t see 1120’s often

Docs Needed:

LLC with 25% or more ownership you need:
2 year 1065’s with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)
If they own <25% then you only need the K1s for 2 years
(If LLC is owned by one person A/K/A single person partnership they can file income on

Schedule C on personal 1040 Return – P & L / Balance sheet and Bank statements still required

SCorp/Corp with 25% plus ownership you need:
2 year 1120’s/1120 with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)
If they own <25% you only need the K1’s for 2 years
1040 Schedule C – Sole Proprietor or Single Person LLC you still need;
2 year 1040s with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)

Wage Earner

2 years w2’s for all jobs
Paystubs for the most recent 30 days
(All w2’s should balance with line 7 on 1040)
VOE’s – Primary job full income breakdown
Former jobs – Dates of employment only needed unless you are trying to  support an income trend then you need full breakdowns

Trust Income

Copy of Trust – must be irrevocable

Child support/Alimony

Marital settlement agreement and final dissolution of marriage
Proof income received (For timeline follow program specific guideline)
If never married and receiving child support request court order and proof received

Voluntary child support/alimony – review program specific guides

All Social security/Disability, Pension, Child Support, Alimony, Trust income must be guaranteed to continue for a minimum of 3 years from closing.

Social Security/Disability/Child Support

may be able to be grossed up if not taxed. For social security review 1040 Line 5 – 5A & 5b will
confirm taxable/non taxable then follow program rules

Dividends/interest/capital gains. Only use if completely necessary – capital gains are not typically allowed as usually they are 1 time events. 

Military Income

Paystubs aka LES (Leave earnings Statement
DD214
Current orders if active

Documents Needed For All Loan Applications

 

 

ALL BORROWERS:

1. Copies of W-2’s for the last two years;
2. Copies of paycheck stubs for the last 30 days (most current);
3. Copies of checking and saving account statements for last three months (all pages);
4. Copies of quarterly or semi-annual statements for checking, savings, IRA’s, CD’s, money market fund, stock, 401k, profit sharing, etc.;
5. Copy of sales contract when ratified;
6. Employment history for the last two years (address any gaps of employment);
7. Residency history over the last two years, with name, phone number, address and account number of Land or Mortgage Company. Rental property copies of leases plus mortgage information.
8. Canceled earnest money check when it clears or corresponding bank statement, if applicable;
9. Commissioned or bonus income — if 25% or more of base, must have tax returns;
10. Check for the expense of appraisal & credit report;
11. Refinance Copy of Note, Deed of Trust, Settlement Statement, Survey, and Insurance information;
12. Any assets used for down payment, closing cost, and cash reserves must be documented by a paper trail;
13. If paid off mortgage in the last 2 years, need copies of HUD1;
14. Copy of drivers license for applicant and co-applicant.

SELF-EMPLOYED BORROWERS:

1. Copies of most recent 2 years tax returns (with all schedules including k-I’s if applicable);
2. Copy of current profit & loss statement and balance sheet;
3. Copy of corporate/partnership tax returns for most recent 2 year period if owning 25% or more of company — copies of W-2’s and/or 1099 forms.

DOCUMENTS WHICH MAY BE REQUIRED:

1. Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits;
2. Previous bankruptcy, need copies of petition for bankruptcy and discharge, including supporting schedules;
3. Divorce Decree if applicable;
4. Documentation supporting moneys received from social security/retirement trust income, i.e. copies of direct deposit bank statements, awards letter, evidence income will continue.

DOCUMENTS NEEDED FOR FHA/VA LOANS:

1. FHA: Copy of social security card and drivers license for each applicant and co-applicants;
2. VA: Original Certificate of Eligibility and copy of DD214 Discharge Paper;
3. VA: Name and address of nearest living relative

 

 

 

Joel Lobb
Senior Loan Officer
NMLS#57916

text or call my phone: (502) 905-3708

email me at 

kentuckyloan@gmail.com

 

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org).

All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.

 

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Which Credit Score is used for a Kentucky Mortgage Loan Approval?

If you’re planning to apply for a mortgage, be aware that the credit score you see on your application might differ slightly from the one you’re used to.

Banks use a slightly different credit score model when evaluating mortgage applicants. Below, we go over what you need to know about credit scores you’re looking to buy a home.

The scoring model used in mortgage applications

While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:

FICO® Score 2 (Experian)
FICO® Score 5 (Equifax)
FICO® Score 4 (TransUnion)

As you can see, each of the three main credit bureaus (Equifax, Experian and TransUnion) use a slightly different version of the industry-specific FICO Score. That’s because FICO tweaks and tailors its scoring model to best predict the creditworthiness for different industries and bureaus. You’re still evaluated on the same core factors (payment history, credit use, credit mix and age of your accounts), but the categories are weighed a little bit differently.

The FICO 8 model is known for being more critical of high balances on revolving credit lines. Since revolving credit is less of a factor when it comes to mortgages, the FICO 2, 4 and 5 models, which put less emphasis on credit utilization, have proven to be reliable when evaluating good candidates for a mortgage.

Mortgage lenders pull all three reports,from all three bureaus, but they only use one when making their final decision.

“A bank will use all three bureaus,”— “It’s called a tri-merge.”

If all three of your scores are the same, then their choice is simple. But what if your scores are different?

If two of the three scores are the same, lenders use that one, regardless of whether it’s higher or lower than the other one.

And if you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO 2, 4 and 5 scores are pulled. The bank identifies the median score for both parties, then uses the lowest of the final two. For example if you have a 598, 625, 604 on each of the main three reporting agencies, then your qualifying fico score would be 604.

FICO Scores used for mortgages Which Credit Score is used for a Kentucky Mortgage Loan Approval?

FICO Scores used for mortgages Which Credit Score is used for a Kentucky Mortgage Loan Approval?

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

 

click here for directions to our office

 

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/