Credit scores Arenít Everything

Every mortgage broker regularly gets the same question: "What credit score do I need to qualify for a mortgage loan?"  I want to help clarify how credit affects your home buying process and also explain a little about credit scoring as well.

Credit scoring for mortgages started in the mid to late 90's and now uses the model fashioned by Fair, Isaacs Corporation, or FICO. These numbers, which reflect poor, average or great credit histories are numerical milestones lenders use to help approve a loan. But what they do not do is approve or deny a conforming or conventional loan simply due to the FICO number. There is no "required" credit score for these loans. Credit scores are used, but not by themselves. Other factors that contribute to a loan approval can be more down payment, good cash reserves or debt ratios below guidelines.

There are certain variations of these themes that will ask for a minimum credit score but typically such requirements are for non-conforming loans that vary from the standard conventional fare such as 100 percent financing or stated income mortgages.

Some borrowers don't apply for a mortgage at all because they find their credit score is below 600 and think they'll get a much higher rate or not qualify at all for a mortgage. Again, on conventional conforming loans credit scores don't dictate an interest rate. Only when applicants are indeed considered "sub prime" are rates adjusted due to overall credit quality. But on a standard 20 percent down mortgage, borrowers with 580 credit scores can be eligible for the same rates as those with rates in the high 700 range. 

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