Qualifying for a Mortgage

How do I qualify for a mortgage?

Generally speaking, a mortgage company will consider the 3 Cs, Collateral (your home), Capacity (income vs liabilities) and Credit. Collateral is your homes value and overall condition. Capacity is your ability to repay the new loan. Credit is your credit score and how you have use credit over the past 24 months (trended data).  

What credit score do I need to qualify for a mortgage?

  • Conforming loans: The minimum credit score is 620.
  • FHA: The minimum credit score is 580. If your credit score is below 580, you may still qualify for a loan on a manual underwrite.
  • VA: The minimum credit score is 620. If your credit score is below 620, you may still qualify for a loan on a manual underwrite.
  • Reverse: There is no minimum credit score requirement. Depending on your credit profile you may qualify for a Life Expectancy Set-Aside (LESA) and a regular Home Equity Conversion Mortgage (HECM).

What is the difference between a Manual Underwrite and Automated Underwriting System (AUS)?

An Automated Underwriting System loan is a loan that passes through an AUS system like Fannie Mae Desktop Originator, Fannie Mae Desktop Underwriter or Loan Product Advisor formerly Loan Prospector. The AUS system gives an underwriting decision and findings. The findings analyzes your credit and financial profile. Even government loans pass-through these systems for an automated underwriting decision. Your loan is still subject to a review by an underwriter, but the chances of your loan closing is very good as long as the information provided is accurate.

Depending on your credit and financial profile, the AUS system may give a “Refer/Eligible.” While this is not an AUS approval, you may still qualify for a home loan with a manual underwrite. On a manual underwrite, your loan approval will be reviewed and approved by an underwriter.

What is the difference between a Conventional, Conforming, Government, and Jumbo?

Conventional loans is a traditional mortgage. Conforming loan refers to the loan limit in your county. For example, the conforming loan limit is for normal areas $453,100 and $679,650 high-cost areas. Government loans are your FHA (insured by United States Department of Housing and Urban Development (HUD) and VA (insured by Veterans Affairs). All FHA loans have Upfront Mortgage Insurance (1.75% of the loan amount) and monthly mortgage insurance (on average it’s about .85% of the loan amount divided by 12) for the life of the loan.