How to have
A 600 Dollar Mortgage
What credit score do I need to buy a house / mortgage? (FICO Scores for Standard & FHA Home Loans)
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hey i'm adam jessica from problem in
EECOM what credit score do you need to
qualify for a mortgage that's what we're
going to talk about in this video but
before we do I'm gonna ask you to please
subscribe to this YouTube channel if you
have not already and if you have already
I thank you for doing so so what credit
score do you need to qualify for a
mortgage we will talk about the numbers
but I also want to say right up front
that your credit score is most certainly
not the only factor that is going to
come into play when you're trying to
qualify for a mortgage so we'll talk
numbers but then we'll also talk about
the other considerations that are
probably just as important as what your
credit score is all right so we talked
about the two main types of mortgages
here when we talk about the credit
scores that you might need to qualify
there's conventional mortgages and there
are FHA or Federal Housing
Administration mortgages we're going to
talk about the conventional mortgages
first these are the mortgages that come
from banks or other mortgage lenders
that do not have any backing from the
federal government so the money that
they are lending out to you they are
taking a bigger risk with there's no
insurance that is going to help them if
you don't pay it back so they are going
to require a higher credit score so for
conventional loans generally the bottom
of the credit score scale that you would
have to get to in order to potentially
qualify would be a 620 credit score now
obviously you would rather be higher
than that 620 is going to you know maybe
just be the price of entry to get you in
but you probably going to end up with
higher interest rates than you would if
you had a higher credit score and even
your chances of qualifying will be worse
than if you had a higher credit score
but 620 is generally the bottom a place
that you need to get to in order to
potentially qualify for a conventional
mortgage loan now if you can get to 720
that is generally thought of as the
place where you are going to get the
best rates from most lenders now
sometimes there will be a little bit
higher 760 sometimes as seen as the
place to get the very best rates but 720
oftentimes is good enough and if you can
get to 760 that will get you you know
pretty much anything in terms of the
best rates beyond 760 really isn't going
to do a whole lot more for you but 620
to get in 7:24 mostly the best rates
seven 60s probably a guarantee of the
best rates from just about any lender
now when I give you those numbers
talking about credit scores for
mortgages you should know that the
credit scores that are used for
mortgages are slightly different than
what you might think of as a credit
score often times so if you are getting
free credit scores from Credit Karma or
a free FICO score from your credit card
those are sort of the general usually
FICO 8 or FICO 9 credit scores that are
going to be a little bit higher than the
FICO mortgage scores that are actually
going to be used so when we're talking
about a 720 in mortgage scores you
probably most of the time would think of
that as being more like a 730 or 735 in
terms of the sort of general FICO scores
and vantage scores can vary from FICO
scores as well so probably what you want
to be doing is thinking about FICO
scores that are those mortgage scores
and if you're just sort of shorthand
thinking about what your credit score is
you might want to take a few points off
of that to think about what your
mortgage score probably is now you can
actually get your mortgage scores from
FICO directly you can go to my FICO and
you can buy them actually did another
video where I showed what you get from
my FICO including those mortgage scores
now you might know that you have more
than one credit score because there are
three different major credit reporting
agencies and the credit scores that they
have for you are all slightly different
so you're gonna have a slightly
different credit score from TransUnion
to Equifax to experience so when you
apply for a mortgage loan the mortgage
company is going to look at your
application and they are going to pull
all of your credit scores all three of
your mortgage credit scores from
TransUnion from Equifax from Experian
they're going to get them usually in a
single sort of document that is called a
residential mortgage credit report and
what they are going to do is they are
going to look at all of them and they
essentially are going to throw out the
top score they're going to throw out the
bottom score and that middle score is
what they're going to use to use as sort
of a shorthand for what your credit
score is so
don't them out they just take the middle
one and that is your credit score now
many people when they are getting a
mortgage they're not necessarily getting
that mortgage alone so if you are
getting a mortgage with someone else and
you both plan to be on the mortgage deed
and to have both of your incomes
assessed and all of that as part of the
mortgage process well then you obviously
are going to have credit scores from two
people and the person who has the worse
credit scores of the two of you that's
who they're going to go by so if you for
example have better credit scores than
your husband wife whoever may be buying
a house with you if they have worse
credit scores it's going to be their
middle credit score that is actually
used so you should know that in advance
so if you have a big disparity between
the higher and the lower in terms of the
two people that are going to be on all
the financial documents well then you
might want to consider actually having
the person with the higher credit score
be the only name on the documents
especially if that person can qualify
for the mortgage based on their own
financials even without you know the
financial help that would come from the
second person within that relationship
all right so that's the deal with
conventional mortgages and also the deal
with how credit scores are used within
the application process now let's talk
about FHA loans so FHA loans are loans
that are still given by banks and
mortgage companies and sort of
traditional lenders but they are loans
that are insured against loss by the
Federal Housing Administration known as
FHA and because they are insured against
loss that means the standards to qualify
are lower than they would be for the
conventional mortgage loan so for FHA
mortgage loans that the credit score
minimum is 580 in most cases if you put
down at least 3.5% as a down payment on
that loan and now there are FHA loans
that go down to 500 but you have to put
down at least a 10% down payment in
order to get those and not all lenders
even want to deal with those and even
though those FHA loans are insured
against loss by the gun
Hermant the banks or other mortgage
lenders still don't want to just give
them out to anyone because they don't
want to just ensure against loss they
want to make a profit right so they are
still going to do the general
underwriting that they would do for
anyone even for a conventional loan to
see who is a greater risk than somebody
else so the whole FHA program was put
into place to try to help people buy
homes who maybe didn't have as much of a
track record and didn't have as high of
credit scores but because the banks are
still taking on a measure of risk it's
still their money being lent out even if
it's insured against loss they do have
some latitude to go outside of what the
qualifications normally are for an FHA
loan so when I say 580 is the floor to
get in it usually is the floor but it is
possible that some lenders will give FHA
loans but that floor could be slightly
higher now while the FHA loan program is
a nice thing for people that may be of
lower income and are looking to get into
a more modest home with a more modest
loan you should also know that FHA loans
have higher interest and there are going
to be mortgage insurance payments that
come into place or you're going to pay
more for those loans than you would if
you could qualify for a conventional
mortgage loan so even though you can get
one of those loans with a lower credit
score if you could get yourself up past
620 or even better you get yourself up
past 720 then you maybe could qualify
for a conventional mortgage loan and you
could get much better rates now like I
said at the beginning of this video your
credit score is not the be-all end-all
when it comes to being approved for a
mortgage loan there are other things
that come into play that are probably
just as important and those are going to
include things like your job history
your income your debt load any bad stuff
lurking on your credit reports there's a
lot of other things that a mortgage
company is going to look at before they
say yes now one of the most important
pieces is going to be your monthly debt
to income ratio and what that means is
the amount of your fixed payments that
you have to make every month compared to
the gross
income you make so for example let's say
you made $60,000 a year which would mean
you made $5,000 gross every month now
let's say you had this new mortgage and
that was going to cost $1,500 a month
sort of all in with your mortgage let's
say you had a three hundred dollar car
payment and you had $200 of minimum
payments on your credit cards I'm
oversimplifying here but you put those
things together and you would have two
thousand dollars in fixed payments that
you're going to have to make every month
so that two thousand dollars divided by
that five thousand dollars in gross
income for the month that's before taxes
that's gross income so two thousand
dollars divided by five thousand dollars
that is going to be a forty percent debt
to income ratio and that is right on the
borderline sort of of where the mortgage
companies would consider lending to you
so many cases they use forty three
percent as that debt to income ratio
that is the maximum although there are
times when lenders will go a bit over
that as well however for you for most
people getting into the forty percent
forty three percent debt to income ratio
is pretty high and it's not necessarily
going to feel all that comfortable in
your daily life to be up that high so
you definitely want to be lower if you
can so if you can get that debt to
income ratio more down into the low 30s
that would really be ideal because then
you could pay your bills and feel like
you have a level of comfort every month
not feel like you are just right on the
edge of you know being able to keep all
the balls in the air and pay for all the
things that you need to so those are
probably the important things to know
the debt to income ratio or DTI and your
credit score are obviously going to play
a big part in whether you get approved
however your mortgage lender is usually
going to take a pretty deep dive on you
so if there are other things lurking in
your credit report that they don't like
the looks of those could mean that your
mortgage gets declined even if your
other numbers look okay so one of those
is going to be if you have late payments
on your other loans especially within
the
last year now when I say late payments I
don't mean you paid five days later you
paid seven days late because you forgot
the due date and just you know screw it
up I'm talking about if you paid thirty
days late or 60 days late long enough
for the company that you owed money to
to actually put that on your credit
report as a late payment so a few days
is not going to show up on your credit
report thirty days is going to show up
on your credit report so you want to
make sure you don't have any of those
late payments within that last year
before you're going after that mortgage
charge-offs
tax liens anything on your credit report
where you owe money and someone is still
trying to collect that money from you
you may have to pay off that money to
even qualify for the mortgage in many
cases and even if you don't absolutely
have to pay it in order to qualify many
times you're gonna try it want to try to
do as much as you can to alleviate those
things whether it is paying offered is
coming to some agreement with the loan
company or maybe disputing things that
are not true in order to get that
mortgage to go through if you have a
foreclosure or a bankruptcy in your
recent past those could ding you from
the start regardless of what your other
numbers look like now depending on the
type of mortgage loan you're going after
the amount of time that needs to go by
before you could potentially qualify
could be different but probably no
lenders are gonna look all that
favorably on someone that has had either
of those things happen in the last five
years and bankruptcies could go even
longer in some cases they have to go
even longer before you could qualify for
a new mortgage there are obviously other
things to know and everyone's journey to
get that mortgage finally approved is
going to be slightly different depending
on what you have going on on your credit
report but those are the big things to
know those are the numbers to try to
shoot for in order to get yourself in a
good place where things are squared away
and you can increase your chances of
being approved if you have any questions
or comments please put them in the
comment section below
otherwise I thank you for watching and
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