Fannie Mae has updated the credit score used by DU

Fannie Mae has updated the credit score used by DU in its eligibility assessment to support 

homeownership opportunities for more underserved borrowers.  DU will no longer use the lowest of 

the middle credit score to confirm mortgage loans comply with Fannie Mae’s minimum credit score

 requirement of 620. DU may offer eligibility of these loan casefiles with the use of an average 

median credit score.                                                   

How does this update in DU benefit my borrowers? Do they have to meet a 620 credit score?

Pickup: An increase may be seen in DU with “Approve/Eligible” recommendations based on average 

calculation of all borrower’s middle scores. This scoring method will be used behind the scenes in 

DU for credit eligibility purposes only. Please refer to Fannie Mae guidelines in the following KO 

topics: Credit Scores and AUS Risk Analysis.

Examples:

DU Casefiles:

Number of Borrowers on the Loan Application

Step 1: Determine each borrower's median score

Step 2: Average the median scores to determine casefile score

Scores: 590, 605, 648 / Median: 605

Scores: 590, 605, 648 / Median: 605

Scores: 661, 693, 693 / Median: 693

Average: Not applicable

DU Representative Credit Score: 605 Average: (605 + 693) / 2 = 649

DU Representative Credit Score = 605

Pricing: The average median score will not be used for pricing. Pricing will continue to be based 

on the Representative Credit Score. When the Representative Credit Score falls below 620 due to DU 

using the average median score for qualifying, pricing will be dropped a tier to price below

 620. OB has been updated with the changes required to allow for a less than 620 Representative 

Credit Score; manual locking process is not required.

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: How to Raise Your Credit Score Fast for Kentucky M...

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: How to Raise Your Credit Score Fast for Kentucky M...: How to Raise Your Credit Score Fast for Kentucky Mortgage Loan Approval for FHA, VA, USDA and KHC Mortgage loans.  Fico Score Tips to raise ...

What kind of credit score do I need to qualify for a Kentucky Mortgage Loan in

Kentucky Mortgage Loan Credit Score Requirement 

Credit scores play an important part in getting approved for a Kentucky Mortgage loan. Your credit scores consist of 3 digits and range anywhere from the low-end of 300 to a high score of 800 range on the top-end. Most borrowers are going to fall in the 500, 600, 700 range, with a few in the 300 and 800 ranges.

 The higher the score the better it is for chances of getting approved for a Kentucky Mortgage loan and getting better terms as far as rates, closing costs and mortgage insurance.

There are three main credit bureaus in the United States that lenders will pull from Experian, Equifax, Transunion. Most loan programs will take your middle score. So For example, if you have 629 on transunion, 690 on equifax, and 577 on Experian, your middle credit score would be 629. 

The credit score that mortgage lenders use is the fico score. They're different credit scoring models out there, so keep that in mind, that even though you may get your credit score from Credit Karma or Credit Sesame, this is not your true fico scores that lenders use in Kentucky to approve you for a mortgage loan. 

Credit Score vs Credit Karma: what's the difference?  

Different Kentucky Home Loan Programs require different credit score requirements. I will discuss each below:

• Kentucky FHA Mortgage loan credit score requirements: 

• The minimum credit score is 500 for Kentucky FHA loans. However please keep in mind these two things: 1. Lenders credit their own overlays to increase the credit score threshold, most being 620, and secondly, if your credit score is below 580, you would need 10% minimum down payment,  and if the credit score is over 580, then you can go with the minimum 3.5% down payment. 
• Obviously if you have a higher credit score, this will increase your chances of getting approved for a Kentucky FHA Mortgage and possibly better rates and closing costs options.  

• Kentucky VA Mortgage  loans requirements : 

• VA does not have a minimum credit score requirement, but if the credit score is below 620 few lenders will do the loan, but I am set up with several Kentucky VA lenders where I have closed them down to a 560 credit score, but the borrower had good compensating factors such as: large down payment, low dti ratios, good job history and good residual income with no previous bankruptcies or foreclosures. 
• I would suggest if your credit scores are below 580, I would suggest on working on getting the scores up before you applied for a VA mortgage loan. 
• A lot of lenders will do a rapid rescore which in some cases can increase your credit scores in as little  as 7-10 working days. 
• The federal Department of Veterans Affairs (VA) guarantees loans for current and former members of the military and their families. VA loans provide very favorable terms to eligible borrowers and have limited qualifying requirements. You can get a VA loan with no down payment so long as the home isn't worth more than you pay for it, and there's no minimum credit score to qualify. You also don't have to pay for mortgage insurance, although you do have to pay an up-front funding fee of of between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.  

• Kentucky USDA Mortgage credit score requirements: 

• According to their guidelines, USDA will go down to a 580 credit score, but most lenders will want a 640 credit score. USDA uses an online system to underwrite the risk of the loan, and scores under 640 are very difficult to get approved.
• 
  
• Validating the Credit Score.  Two or more eligible trade lines are necessary to validate an applicant’s credit report score.  Eligible trade lines consist of credit accounts (revolving, installment etc.) with at least 12 months of repayment history reported on the credit report.  At least one applicant whose income or assets are used for qualification must have a valid credit report score
• The Rural Housing Service (RHS) operates under the federal Department of Agriculture to guarantee loans for rural home-buyers with limited income who can't obtain conventional financing. The upside is that Kentucky USDA loans require no down payment. The downside is that they charge a steep up-front fee of 1% of the loan amount (which can be paid off over the entire loan term) and an annual fee of 0.35%.
• 
  
• Credit score over 680:  Perform a basic level of underwriting to confirm the applicant has an acceptable credit reputation.  Perform additional analysis if the applicant’s credit history has indicators of unacceptable credit as noted in Paragraph 10.7 of this Chapter. 
• Credit score 679 to 640:  Perform a comprehensive level of underwriting.  Underwrite all aspects of the applicant’s credit history to establish the applicant has an acceptable credit reputation.  Credit scores in this range indicate the applicant’s reputation is uncertain and will require a thorough analysis by the underwriter of the credit to draw a logical conclusion about the applicant’s commitment to making payments on the new mortgage obligation.  The applicant’s credit history should demonstrate his or her past willingness and ability to meet credit obligations.   
• Credit score less than 640:  Perform a cautious level of underwriting.  Perform a detailed review of all aspects of the applicant’s credit history to establish the applicant’s willingness to repay and ability to manage obligations as agreed.  Unless there are extenuating circumstances documented in accordance with this Chapter, a credit score in this range is generally viewed as a strong indication that the applicant does not have an acceptable credit reputation.  
• Little or no credit history: The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third party verification or cancelled checks. Due to impartiality issues, third party verification from relatives of household members are not permissible.   Lenders can develop a Non-Traditional Credit Report for applicants who do not have a credit score in accordance with Paragraph 10.6 of this Chapter

• 
  

Kentucky Fannie Mae and Freddie Mac Conventional Credit Score Requirements

These are considered “conventional loans’ that can be often be obtained with a 3% to 5% down payment. Of course, there are higher standards for conventional home financing. The most common minimum credit score requirement to get approved today is a 620 FICO. This type of score is typical for people that have high credit card balances or a few delinquent payments in their past. The general consensus on Freddie Mac and Fannie Mae loans in Kentucky is that a 620 score is the entry-point to qualify, but you will need a thorough documentation of income with credit scores in the 620 to 640 range. You will have a better shot to be approved for a mortgage backed by Fannie or Freddie with a 680-credit score and less strenuous underwriting.

• Competitive Mortgage Rates and Fees
• Monthly Mortgage Insurance Is Not Always Required
• Ideal for First Time Home Buyers with Good Credit

Common Misconceptions About Credit Scoring

Credit scoring is a mystery to many and it even surprises us occasionally.  Below are examples of common misconceptions we hear all the time

If I pay off my balance every month so it should show a zero balance on my credit report:  Wrong!

Credit card companies will usually report your ending balance on your monthly statement. So even if you pay off your credit card every month, it will not show a zero balance on credit. A bad scenario for someone’s score would be the following: Credit limit is $1,000 and the card owner charges $900 but pays off the balance once the statement is received. The card will report a $900 balance that is 90% of the credit limit and that will hurt the credit score as 30% of a credit score is balance compared to credit limits as a percentage.

I will lower my credit limits to make my credit look better.  Wrong!

Do not put your credit limits too low! Again, 30% of your score is balance compared to credit limits. For instance if you charge $1000 per month on a $10,000 limit card, the balance is 10% of the limit which is very good. On the other hand, if you lower the limit to $1500, the balance is 67% of the limit which hurts the credit score.

I will close my credit cards to help my credit report.  Wrong!  most of the time

Having a good mix of credit types is very important to have a great credit score. I will say this again, 30% of the score is balance compared to credit limits on revolving accounts and if someone doesn’t have any open cards, then a lot of points are being lost on a score. Most experts say that having 2 or 3 revolving accounts that report to all 3 bureaus with low balances compared to the limits is the magic number for the best score. Also a portion of the credit score is how long accounts are open so keep the lines of credit open a very long time rather than opening and then closing accounts often

What if underwriting will require me to pay off a collection to approve my loan, Am I stuck?  No

Then all you need to do is simply have to do it have it as a condition to pay off the collection at closing rather than up-front.  By doing this, it will not have time to lower your credit score before closing your loan.

I haven't paid my student loans in years because they are in collection status, but that was a long time ago so I'm ok, right?  No

Unfortunately if they are government backed loans, then this will affect your ability to obtain a government mortgage loan.  A good thing about government student loans is that they will usually allow you to start paying them again, then usually within 6 - 12 months, they will report the loan again as current.  Make sure that the company agrees to do this and get it in writing.  By doing this, you can go from owing Thousands of dollars as a collection to having a regular loan with hopefully a manageable payment.

I just got a car loan, so my credit should be good.  Not necessarily

I hate to say it, but about anyone can get a car loan no matter how bad the credit is so this is not an indication of good credit. Having an installment loan like a car loan is a good thing to have on credit as long as it is paid on time and the longer it has reported, the better. As a side note, be wary of buying a car and the dealership pulling your credit without your knowledge to many creditors. It is not uncommon for someone with marginal or sometimes good credit to have their credit pulled 10 times or more.

I will pay off my old collections just before applying for a mortgage so my scores will go up.  Usually your scores will go down unless they agree to "delete" or "remove" them from your credit in writing

Be careful here! If there are older collections with a date of last activity that is a while back and they are paid off, the credit scores can go down in the short term. So if someone has a 650 credit score which would qualify for most mortgages, wants to increase their scores a little by paying off old collections just before purchasing a home, the collections would now show paid off (if they actually update which they often don’t), but now show a date of last activity as “now”. It doesn’t make sense but the bureaus treat the collection activity like it just happened which doesn't seem right but it happens. Often it makes more sense to pay off the collections at or prior to closing following the recommendation of the loan officer.  Fair Isaac is working on potential changes to how this affects scores and maybe the other credit bureaus will make this change too.

Charged off accounts and collections are treated the same when getting a mortgage, right?  Actually NO

Sometimes when an account is charged off, it is not required to be paid off for qualifying purposes.  This is true on FHA loans for instance.

I will dispute some credit accounts on my credit report so my scores will go up.  

If you want a personalized answer for your unique situation call, text, or email me or visit my website below:

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

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



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.

Does Carrying a Credit Card Balance Help Your Credit Score?

3% down Home Ready Mortgage Program by Fannie Mae for Kentucky First Time Home Buyers

Is your borrower Home Ready to buy their first house in Kentucky?



Limited cash for down payment  for Kentucky Homebuyers(as low as 3% down pam)

Credit score 􀂖 620; borrowers with credit scores of 680+ may get even better pricing

Low to moderate income check here >>>>> https://homeready-eligibility.fanniemae.com/homeready/

First-time or repeat Kentucky home buyer

Non-household friends, relatives or loved ones prepared to be co-borrowers

Has gifts, grants or Community Seconds® to use toward down payment

Receives rental unit or boarder income

Wants to refinance to lower monthly payments

-- 

Joel Lobb
Mortgage Loan Officer
email:          kentuckyloan@gmail.com

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

https://www.mylouisvillekentuckymortgage.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/

KENNETH R. HARNEY: Your FICO score is not your mortgage destiny

KENNETH R. HARNEY: Your FICO score is not your mortgage destiny

the current market shift — lenders willing to take on slightly more risk with lower-scoring borrowers — is borne out by new data from mortgage software giant Ellie Mae. In its latest study of rates, scores, down payments and other loan terms, researchers found that in December of last year, fully two-thirds — 66.1 percent — of homebuyers insured by the Federal Housing Administration (FHA) had FICO scores below 700. 

A remarkable 5.1 percent of these had deep subprime scores between 500 and 599, indicating exceptionally high risk of future default. At the other end of the scale, just 1.9 percent had FICO scores of 800 or above. 

To be fair, FHA traditionally has served homebuyers with lower scores than those in the conventional market served by Fannie Mae and Freddie Mac. But the agency has been slightly more lenient recently on scores and debt-to-income ratios.

Fannie and Freddie also have been open to a wider swath of buyers than many home shoppers might assume. According to Ellie Mae’s December report, more than 1 percent of conventional purchase-loan borrowers had deep subprime FICO scores between 500 and 599. More than one in six loans — 17.7 percent — had scores below 700.

In both FHA and conventional loans, borrowers with low scores may have had “mitigating factors” in their applications that reduced risk, such as high bank reserves or exceptional employment stability.

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.

Mortgage Borrowers Get Loan Approval With Lower Credit

Mortgage Borrowers Get Loan Approval With Lower Credit:

New loans for borrowers with FICO scores reaching as low as the 400s jumped from 21.9 percent in 2009 to 29.7 percent last year, according to the study. FICO scores range from 300 to 850.

From January to March of this year, borrowers who were approved for FHA loans—which offer low down payment options for first-time home buyers—had an average credit score of 672, according to FHA data. During that same period in 2011, the average credit score for an FHA borrower was 701. FHA borrowers also have had higher debt-to-income ratios in recent years. Debt-to-income ratios measure monthly household income against other debt, such as credit cards, auto loans, and personal loans.

Between January and March, about a quarter of FHA borrowers had a DTI of more than 50 percent, FHA data shows. In 2013, only 12.7 percent of FHA borrowers had such a debt load.

Recent studies suggest that home buyers with low credit scores and high debt-to-income ratios may have an easier time qualifying for financing.

Joel Lobb Senior  Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

 phone: (502) 905-3708

 Fax:     (502) 327-9119

kentuckyloan@gmail.com

Company ID #1364 | MB73346E

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.  NMLS#57916 http://www.nmlsconsumeraccess.org/

. 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.

5 Easy Ways to Improve Your Credit Score

1. Get Your Credit Report from any of the 3 Bureaus for Free

Getting a credit score intimidates a lot of people. It can seem like an

uphill battle. However, having good credit will make your life easier.

Once a year you can get a free credit check from

www.annualcreditreport.com/index.action and utilize credit bureaus

such as Experian, Equifax or TransUnion.

2. Remove the Errors from Your Credit Report

The Federal Trade Commission says that 5% of consumers pay more for

insurance and financial services due to errors on their credit reports. And

around 25% of reports contain errors that affect them negatively.

Note anything you see on your report that seems incorrect. This may

include: payments marked late when you paid them on time, negative

marks that should have expired etc. Next file a claim or dispute and the

credit bureau must respond within 30 days.

3. Increase Your Credit Limit

Increasing your limit while keeping your balance the same can help you.

Your credit utilization ratio plays a significant role in influencing your

credit score. This ratio comes down to the total credit you have and how

much you actually use. Bruce McClary, spokesman for the National

Foundation for Credit Counseling, advocates that your ratio stay under

30%.

4. Use Your Credit Cards

A 0% credit utilization ratio can actually harm your score. Credit Karma

conducted a study which found that people who had a 0% ratio had a

lower credit score than those that use 1%-20% of their total credit. Use

your credit card wisely and as a tool to build credit.

5. Clear Past Balances and Make Payments on Time

Your payment history affects your score the most. Call your creditor to

arrange a payment plan for your past due accounts. Also ask if that will

rescind the delinquencies on your reports. If not don’t worry just focus

on clearing your past balances. Work out an early notification reminder

of due dates with your card issuer.

Don’t put yourself in a position where you spend more than you can

afford to pay back. Get with a professional that knows the ins and outs.

Contact us today as we will help you and teach you the best ways to

increase and maintain your discipline, when it comes to improving your

credit!

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#57916 http://www.nmlsconsumeraccess.org/