Using Secured Credit Cards To Increase Scores For Mortgage

Credit scores also have an impact on debt-to-income ratio requirements with FHA loans. For example, borrowers with credit scores below 580 FICO need a 10% down payment for an FHA-insured mortgage loan. There are also reduced debt-to-income ratio requirements for borrowers under 620 credit scores with FHA loans.

What Is The Lowest Score I Can Have To Get an FHA Loan?

For borrowers with credit scores between 500 and 580, the minimum down payment required is a 10% down payment on FHA loans. FHA borrowers with only a 3.5% down payment need a credit score of at least 580 FICO.

HUD, the parent of FHA, allows borrowers with credit scores down to 500 FICO to qualify for FHA loans. However, if you have under 580 credit scores and down to 500, you need to put a 10% versus a 3.5% down payment on an FHA home purchase loan.

With a FICO credit score of 580 and 620, the maximum back-end debt-to-income ratio cannot be greater than 43%. For borrowers with higher than 620 credit scores, the front-end DTI cap is 46.9%, and a back-end DTI is capped at 56.9% to get an approve/eligible per Automated Underwriting System (AUS).

Using Secured Credit Cards To Raise Credit Scores

Homebuyers who do not have a 10% down payment and only have a 3.5% down payment on a home purchase would need a minimum of 580 credit scores on FHA loans. Borrowers with a credit score of 577 FICO but do not have the 10% down payment towards a home purchase would need a minimum credit score of 580 FICO.

The 580 mark is the minimum credit score needed to qualify for a 3.5% down payment FHA loan. With credit scores under 620, the maximum back-end debt-to-income ratio allowed is 43% DTI to get an approve/eligible per AUS FINDINGS.

If the home buyer has a debt-to-income ratio of 56.9%, the minimum credit score required is 620 FICO to get approve/eligible per AUS FINDINGS.

Paying Down Credit Card Balances To Boost Scores For Mortgage

There are ways of raising credit scores to qualify for a mortgage. Credit Scores can fluctuate greatly from month to month consumers max out credit cards, which can plummet credit scores. However, their credit scores will skyrocket if they pay down their credit card balances to 10% of the credit limit. The fastest and easiest way to boost credit scores is by getting secured credit cards for those with few or no revolving credit accounts.

Each secured credit card can boost credit scores by at least 20 points. Depending on the credit profile, consumers can easily boost credit scores by 60 or more points by getting three secured credit cards.

Most mortgage loan originators recommend borrowers needing credit score improvements to get secured credit cards. Borrowers needing credit advice or to qualify with a lender with no overlays, don’t hesitate to contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.