I saw this article in the Washington Post called Your Credit Score Has to be Good Not Great.  Take a moment and read it if you have the time.  While I agree with most of what the author says, I want to take some time to talk about how your credit score affects what type of mortgage you can qualify for.

Granted, the higher your credit score is the easier it will be for you to get a mortgage.  However, as I’ve mentioned a bunch on this blog, FHA-insured mortgages are making a HUGE comeback, and these mortgages are not credit score driven.  They still offer low rates to consumers, and sometimes even make sense for higher credit borrowers.  Borrowers do need some money out of their own pocket, generally 3% of the sales price (though grant programs can help with this money).

What has gotten difficult if you have a lower score are the following:

• investor loans, below 680 without a lot down? Forget it.  720 or better is where you really need to be
• stated income loans, I think we’ve all heard about this #2 fall guy of foreclosure problems (subprime being #1).  Stated income was made for a legitimate reason, self-employed persons with hard to verify income, but boy was this taken to a wrong extreme, and even those who it was meant for are now paying the price.  Stated-income is not impossible for those with excellent credit, but just don’t expect it to be the piece of cake it once was
• Stated income and investor, we got our work cut out for us!  It can be done, but you better have some equity and at least a 680 score, 720 if you don’t want to a decent rate
• Jumbo Loans: Want a loan for more than $417,000?  FHA can’t help you and rates have sky-rocketed for even great credit borrowers, I suggest skip the Jumbo and get a first and second mortgage, it’s cheaper. 

Yes, guidelines have gotten stricter, but at the end of the day, it’s better for EVERYONE.  Investors of real estate backed investments can breathe easier, buyers know they really qualify and are asking better questions of their lenders.  Crooks are getting out of the business on all sides. 

Bottom line, you will have a much easier time getting a mortgage the higher your credit score (duh!), but if you are in the 620-680 range, don’t worry too much, there’s still options available.