If you are looking to purchase a home or considering refinancing your home and have a credit score under 620, there are still many options available to you. Despite the subprime meltdown, there are still many programs available to borrowers who have a credit score below 620. 620 used to be the benchmark cutoff point for prime and subprime lending, but automated underwriting has allowed for borrowers with some credit blemishes to benefit with prime or near prime rates.You may qualify for a Fannie Mae Expanded Approval loan if your credit score is below 620. The rates are slightly higher for an expanded approval loan, and there are three different levels for which you may qualify for financing. Along with your credit rating, debt ratios, down payment or equity, and asset reserves are taken into consideration.
If you are a veteran, you may qualify for VA financing even if you have a credit score below 620. If you are active duty, or honorably discharged through the reserves, active duty, or National Guard you may qualify for to obtain VA financing. Va financing offers up to 100% purchase money and up to 90% cash-out refinances for qualified consumers.
A Credit Score Under 620 may not prevent you from obtaining a good mortgage, particularly if you have substantial liquid assets in the bank or a very good stream of income.
If you have a credit score under 620 and can qualify for a Fannie Mae mortgage you will have an attractive interest rate and low payment. Fannie Mae mortgages have superior pricing because there are a large number of buyers in the secondary market for these loans.
Fannie Mae has made qualifying for a conforming loan with a credit score under 620 easier with it's My Community Programs. The My Community Programs will not only usually allow for credit scores under 620, but they will also allow for very low to no down payment purchases for homes. Therefore, even if your credit score is not a 620, you still have options available to still qualify for a conforming loan.
You may even qualify for a conforming loan if you get approval through an automated underwriting system. Your chances for automated approval increase if you have a lot of equity in the property or a large amount of assets or low debt to income ratio. However there usually is a small increase in the interest rate over the standard conforming loan rate when your score is below 620. Ask your mortgage broker about automated approval.
If you have a credit score under 620, you may still qualify for conventional financing if you have some compensating factors. Compensating factors include a low loan to value(plenty of equity), assets in reserves after closing(401k, IRA, etc.), and a low debt to income ratio. Many times an experienced loan officer can score a loan through an automated approval to get better terms for you.
You may qualify for FHA financing with a credit score of below 620. FHA financing allows as little as 2.25% down for purchase money transactions. FHA financing allows for cash-out refinance transactions of up to 95% of the value of your home. Maximum mortgage limits apply, so contact your mortgage professional at 888-275-6788 or [e-mail] for the FHA loan limits in your area.
