What credit score is needed for a mortgage?
Are you ready to buy a house but you have no idea what kind of credit score you need,
what type of credit, what your credit should say, how it should look.
Well, you are confused and I was too.
I'm going to tell you exactly what you need to know about your credit and mortgages so
you are no longer confused.
Let's go.
I'm going to tell you the biggest secret that I learned from over 18 years in the mortgage
business.
I'm going to share with you 3 hidden ways that you can get approved for a higher loan
amount.
And I'm going to share with you the biggest mistake that people make that gets them declined
every single day.
I'm going to share with you so you don't make that mistake.
So, let's first talk about how the mortgage loan process works.
As you may know, the mortgage process can be very daunting for many people.
It starts out with a very, very long application.
Let me tell you about it.
The application in the business, we call it a 1003 which is 1-0-0-3.
That's the code for the Fannie Mae form.
And it's about 4 to 5 pages.
On the mortgage loan application, it's going to break down everything.
It's going to break down not only the type of home that you're buying, the year, the
interest rate, the loan terms and things like that.
It's going to break down all of your information.
Your name, your social security number, your birthday, your employment for the past 2 years.
All of your assets.
You're going to have to list out every single one of your assets, all of your bank accounts,
all of your savings accounts, all of your retirement accounts and what the balances
are.
Additionally, you're going to have to put every single one of your debts.
All of your debts that are listed on your credit report will be uploaded and added to
the 1003.
And then they're going to go through a whole where you will sign it and then that is the
application.
Additionally, with the traditional mortgage, they are going to look at your employment
and your income.
Typically, they're going to look for the past 2 years of employment to see that you have
stable employment that has continued with no gaps longer than 30 days.
Additionally, from your employment, what is your income?
How often are you paid, what is your annual salary, monthly salary, things like that.
All of those things are going to put together your entire mortgage profile.
They're going to take your application.
They're going to determine what your debt ratio is.
Meaning, how much debt do you have in ratio to your income.
Like I said, they're going to dig into your employment and your income.
And they're going to calculate how much money your make per month on a gross basis.
Then they are going to divide that number.
For example, if you make $24,000 a year, we're just going to use gross numbers.
That breaks down to $2,000 per month.
Then they're going to look at your credit report and list out all the debts that are
there.
All of your credit cards, all of your auto loans and things in that nature.
And then they're going to add those numbers together.
There's going to be 2 different ratios.
1 debt ratio that includes the new mortgage that you're trying to get and that's going
to be like the qualifying amount that you can get.
And then they're going to give you a debt ratio without the mortgage.
Okay?
So, that's your back end ratio and your front end ratio.
Don't necessarily get too caught up in those things but I'm just explaining the process
so that you know exactly what mortgage lenders are looking for.
Now, let me give you some hidden tips on what they're really looking for and how to present
this information correctly.
So, the next big thing when it comes to getting a mortgage that I didn't mention before of
course is your credit report and your credit scores.
Because of course, you're wanting to know "What credit score do I need?"
So, let's break that down.
As I stated before, they're going to pull your entire credit report.
In mortgages, they actually pull a different credit report than they do in for auto loans
and creit cards called a mortgage residential report, alright?
And it will have your FICO score.
It will be trimerge.
It will be all 3 of the credit bureaus in one report.
It will be the Equifax report, the Experian report and the Transunion report all in one
credit report, okay?
Additionally, they're going to have a score all 3 of those bureaus will give you a score.
For example, for a mortgage.
In most cases, you're going to at least at 640 credit score.
Now, that's just traditional.
I'll get to some hidden ways in a second.
But in a traditional mortgage, the lowest credit score they're really going to want
is a 640.
And that is going to be determined by your middle score.
Like I said previously, you're going to have a credit report with 3 bureaus.
So, then we'll have 3 different scores.
You get a score for your Equifax, your Transunion, and your Experian.
Usually, they are very similar.
For example, you may have a 640, a 645 and a 650.
You know, between the 3 credit bureaus.
And they will take your middle score to qualify you, okay?
But more importantly are going to be the tradelines on your credit report.
How well you pay them.
So, not just a credit score matters.
But also how well you pay your other debts, okay?
So, for example, you have this great credit score, you know, you have 720 credit score.
You look on Credit Karma and you're like, "Wow, I got a great credit score."
But you only have one Capital One card, you're probably not going to get qualified for a
mortgage because it's not just about the credit score.
Let me break that down for you.
So, when it comes to getting a mortgage, there are 3 types of traditional mortgages, okay?
You have conventional loans.
Those are your Fannie Mae and your Freddie Mac back loans.
Those are the traditional mortgages that most people get when they go to a bank.
If you went to any bank or any credit union, most likely if you have decent credit, they're
going to offer you a conventional mortgage.
You will have to put down 3% or 5% or 10%.
Or if you're buying a second home or an investment property, you're going to have to put down
more.
So, let me give you a quick example.
You have 3 different types.
Like I said, you have Fannie Mae and Freddie conventional loans.
And then you also have government loans.
That's the second type of loan.
So, think FHA loans, VA loans, USDA loans.
Again, these are similar loans that you will go to a bank or a credit union to get.
However, they are backed.
Meaning, they are securitized by the government.
The federal housing authority guarantees those loans.
Now, there's not anything that you need to do with that information.
Like I said, if you're applying for a mortgage, you're going to go to Bank Of America, Chase,
or your mortgage bank or whoever you go to and you don't necessarily need to know this.
But I'm telling this to you for your own information because it is important.
You're going to ask what type of loan you're getting.
"Am I getting a conventional loan or am I getting a government loan?"
And then there's a thrid type of loan.
That is a non-government, non-conventional loan.
It's called non-QM which stands for a non-qualified mortgage.
It use to be called subprime, okay?
And so, I know many of you have heard the term subprime before.
You know, in 2008-2009, too many people are getting these subprime mortgages.
Meaning, you can have bad credit.
You could have low income.
You didn't have to verify your assets or your income or your job and things like that.
They really took the guidelines now.
And more people are able to get mortgages.
Unfortunately, many people were not able to afford those mortgages or given mortgages.
So, subprime got a really bad name.
And rightfully so because in many cases, it wasn't explained to people.
However, those loans are back.
And this is a big opportunity for you if you know and understand how to get one of those
loans and how to use it properly so that you don't end up in a bad situation.
A non-QM loan can be perfect for someone that is self-employed or someone that has a job
that they just started.
Or they're contractors.
Meaning, they make a lot of money but their tax returns may not reflect it, things of
that nature.
So, you can have a much lower credit score.
In fact, with a non-QM loan, you can have credit scores as low as 550, alright?
I'm going to put a link below to a lender that I know that goes down to 550 on a mortgage
through a non-QM product.
You can do different things like bank statements to show your income.
You can do verifications of employment.
I'll explain that in a second.
So, the basic thing that you need to know is that there are 3 types of loans.
conventional, government, and then non-QM loans.
And different credit scores will apply with your conventional loans, you're going to need
a 680 and above.
With your government loans, you're going to need like 620 to a 640.
And then with your non-QM loans, you can really go down to 550.
You're just probably going to need a higher down payment.
Let me get into that really quick for you.
Okay.
So, another very big thing that you need to know when it comes to credit score...
Like I said, it's not just the credit score that matters.
You're going to need a credit report that reflects that you've had different types.
You're going to need a credit report that reflects that you've had different types of
accounts and that you've paid them well.
So, like I said, just because you have 720 score, if you only have 1 Capital One card,
you're probably not going to qualify.
In most cases, they are going to want you to have at least, 3 tradelines and they're
going to want you to have at least one of those tradelines be at least 24 months old.
Meaning, you got that credit at least 2 years ago.
Again, what lenders and banks are looking for is your ability to repay the loan more
than anything.
They're in the business of loaning money for mortgages.
The great about mortgages and why they're not as difficult as people think is because
they are collateralized loans.
Meaning, you have a house that's working as collateral to the loan.
So, banks are a little bit more loose with lending to people on a mortgage than some
unsecured types of debit credit cards and things in that nature.
So, if you've had a situation where you have credit that's more than 2 years and you have
a couple of tradelines, you have stable employment.
You've worked your job for maybe 2 years.
Most likely, you will be able to get a mortgage of some type.
Let give you a quick hint.
If you have a situation where you think you may have some tricky credit or you don't have
some credit scores that I mentioned, I strongly suggest finding a mortgage broker, okay?
There's a big difference between going to a bank for a mortgage or a credit union and
going to a mortgage broker.
Mortgage brokers are not banks.
They are literally brokers.
Meaning, they are tied to multiple lenders.
So, they may be able to look at your credit.
Pull it one time.
See your situation, see what your credit is and then send your loan or your application
to the best fit, okay?
So, that's increasing your chances of being approved.
Instead of going to different lenders and seeing if your approved, you can go to one
mortgage broker and they can help you out.
So, it really depends on your situation.
Hopefully, that answered everything and you completely get that if you have a situation
where you're not quite sure, you might want to reach out to a mortgage broker.
So, I have a couple more points.
But I noticed you haven't subscribed yet.
So, this will be a great time for you to go ahead and click that subscribe button and
make sure to click that notification bell so you don't miss any of this content.
Okay.
So, let's back into it.
So, another thing that you can do that is super important is you can skip all of this.
I know this sounds crazy.
But literally, one of the things that I do is I don't really deal with banks and mortgages
anymore, okay?
I work as a real estate investor.
Meaning, I find people that are having property problems and I'm able to get and acquire those
properties for pennies on a dollars.
In may cases, those people already have a mortgage and they're having trouble paying
that mortgage and I'm able to take that property and take over that mortgage payment without
ever having to deal with any banks.
It's a concept called subject to.
Again, I've made an entire video on a subject to teaching you all about how to do this,
how to start thinking like a real investor and how to get properties without having to
deal with banks or your credit.
I'll put a link to it and you can watch that whole video.
So, you can skip this whole thing and just go right to getting properties.
So, there you have it.
You know exactly what credit score is needed for a mortgage.
If you are looking for more information and you are loving all of this content, I've created
an entire program, an entire training just for you absolutely free.
Please check out Noellesfreetraining.com.
Again, it's a training that I've mad.
It's about an hour long.
It was a little bit too long to put up here for you.
But it will teach you my exact formula for investing without losing money so you can
get started.
Again, noellesfreetraining.
Make sure you check it out and we'll see in the next episode.
To your success.