Products for the FICO Challenged
Let’s face it. We’d all like to have the best FICO score possible. But the reality is that some responsible house hunters have lower credit scores. Fortunately, there are several home financing options with less stringent score requirements.
As a mortgage professional you can help determine which of the following loans may be right for your clients. Each financing option has specific requirements that must be met and are subject to underwriting approval.*
FHA loans are insured by the Federal Housing Administration and typically require as little as a 3.5% down payment. Minimum FICO: 580
VA loans offer qualifying veterans the option to buy without a down payment. These mortgages are government-insured through Veterans Affairs. Active duty military may also qualify. Minimum FICO: 620
Conventional loans aren’t insured by a federal agency, so buyers with a down payment lower than 20% will be required to purchase Private Mortgage Insurance (also called PMI or MI). Minimum FICO: 620
More Low-FICO Options
The following financing programs are called Conforming Mortgages because they conform to the underwriting guidelines established by Fannie Mae (Federal National Mortgage Association – FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC)
Fannie Mae HomeReady® loans are designed for low- to moderate-income (LMI) borrowers and are backed by FNMA. Minimum FICO: 620 (fixed rate) or 640 (adjustable rate)
Freddie Mac Home Possible® loans are backed by FHLMC and require only a 5% down payment. Minimum FICO with Automated Underwriting System (AUS): 660, depending on property and mortgage type
Freddie Mac Home Possible AdvantageSM loans are backed by FHLMC and require only a 3% down payment. Minimum FICO with AUS: 620, depending on property and mortgage type
This article is designed to provide a brief introduction to mortgage products for potential homebuyers who have a below-average to moderate FICO score. This lower score may be the result of a shorter credit history or other non-derogatory factors. Borrowers with lower scores that result from bad credit situations (loan defaults, collection actions, missed payments, etc.) are less likely to qualify.
- By Michael Kearney,
Nov 14, 2016
* Information contained in this article is for educational purposes only. It is not a commitment to lend. Program restrictions apply. Stearns Lending, LLC offers many loan products. Stearns Lending, LLC is a California Limited Liability Company headquartered at 4 Hutton Centre Drive, 10th Floor, Santa Ana, California 92707. (800) 350-LEND (5363) Company NMLS# 1854 (www.nmlsconsumeraccess.org). This information is accurate as of , 2016. © 2016 Stearns Lending, LLC All Rights Reserved
HomeReady® is a trademark of Fannie Mae. Home Possible® is a trademark of Freddie Mac. Home Possible AdvantageSM is a service mark of Freddie Mac.