subject: First-time Home Buyer Mortgage: The New Credit Standards Brought On By The Foreclosure Crisis [print this page] Because of the recent foreclosure crisis, new credit standards for first-time home buyers (any home buyer really) have been put into place. Depending on which side of the fence you're on, it's either a good thing, or a hindrance to buying a home.
This article will discuss FICO scores and mortgage qualifications. Following is a look back at what FICO scores used to have to be to qualify for a mortgage, and what they need to be now.
First-Time Home Buyer Mortgage Qualifications: A Look Back at Old FICO Standards
On a recent news cast, the newscaster blared from the television that some credit card companies were considering making 740 the FICO score you had to have to qualify for a credit card.
In the past, if you were dead or alive, you could get a credit card. Family pets have been known to receive credit cards in the mail as well. Really, there have been instances of dead people and pets being issued credit cards. This is how free willing credit card companies were when extending credit. Now, Bill Gates might have a problem qualifying for one.
So, what does this have to do with getting a mortgage? Well, who extends credit for credit cards? Banks. And, who extends credit (loans) for mortgages? Banks.
Zero Down Home Loans: Get 100% Financing with a 580 or 620 FICO Score?
FICO scores have to be a lot higher than they used to be to qualify for a home loan. It used to be that a prospective homeowner could qualify for 100% financing and a conventional mortgage with a 620 FICO score in most cases.
In a lot of cases in the past, a prospective homeowner could qualify for 100% financing (zero down home loans) with FICO score as low as 580. It would be a subprime mortgage, but the home buyer wouldn't have had to come to the table with any money nonetheless.
The New Reality: What Your FICO Score Need to Be to Qualify for Zero Down Home Loans
These days, mortgage lenders have raised the bar on what your FICO score needs to be to get a convention loan with a good interest rate.
If you do any research online, you'll see that most websites and blogs still quote a 620 to 640 as the FICO score needed. That's a bit outdated.
Recent credit standards dictate that you need to have FICO scores in the neighborhood of 750-780 to qualify for a conventional mortgage with the lowest interest rates.
