Friends, we get this a lot. A lot…
I think I understand why. Really, in today’s busy world, we have to simplify our processes because it would take entirely too long to explain all the ‘boxes’ that need to be checked in order to qualify for a mortgage. There are many, many mortgage products out there, and you can’t be expected to remember what exactly needs to be done to qualify, so, in many circumstances, it’s just easier for a lender to say, ‘I can work with a ‘620‘ and be done with it
Typically, if you were one of our clients, we would get into a bit more detail because when it does come time to dip our toes into the exciting pool of home ownership, we want them to be as prepared as possible. So, while we are NOT lenders, we do want to share what we know about the process and state, it does have a bit more to do with numbers, or in this case, a 620…
To begin with… what does that even mean?? A ‘620’. Well, that’s a reference to your middle score. But just not any score, most often its your: Mortgage FICO 5,4,2 Mid Score. Which is what the lender ‘pulls’ when they run your credit. This is NOT your Credit Karma Score. Your Credit Karma Scores are completely useless to lenders.
However, even if your mortgage mid score is 620 that still doesn’t mean you qualify. Income, employment history and other aspects of risk notwithstanding, there are other aspects of the credit report that have to be in order to qualify as well. These pieces are looked at by the under writer of the mortgage, and ideally the broker, or lender before it gets to underwriting, so you aren’t disappointed to find our despite your scores being there, other aspects of your credit are not. I call this, ‘liability’… or unpaid debts. Generally speaking, if you have a great deal of unpaid, charged off or collection accounts, they may need to be paid, or settled prior to qualifying. This is where it gets tricky and this is why our phones are blowing up by folks around the country stating their lender said they would qualify if they had a 620.
Starting to make sense??
It is actually not terribly difficult to build enough credit to eek out a 620 mid score. What’s rather more difficult is to determine what accounts are verifiable or reporting accurately, and which ones need to be settled in order to qualify for a mortgage. This is largely driven by whether the mortgage must comply with FHA guidelines, or not. HUD (184 Native American Loans) VA Loans, FHA Loans, USDA/RHS, Conventional Loans, Conforming Loans or Jumbo Loans.
Each loan has their own requirements and standards. Additionally it also depends on what ‘products’ your lender offers.For instance, we in the 4 corners area close a lot of https://www.hud.gov/program_offices/public_indian_housing/ih/homeownership/184 because we are blessed with having a high population of Native Americans. We also do a lot of USDA loans because we are rural. Many of our clients also utilize the standard FHA and VA loans. The point is, each one has specific guidelines that must be adhered to. Many lenders can actually go below the standard 620 credit score, while others like the Jumbo loan, requires much higher scores. But to give a client something to shoot for is a good thing. Please, just bear in mind, it’s not the only thing.
I explain it this way… a 620 score gets you into the party… it gets you in the door, but once your in, you still have to pass many, many tests before you get the keys to the hot tub.
We can help get you there. So come on in! The water’s fine.