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Credit Score Requirements for Conventional Loans

By Stevie Duffin-Lutgen Updated on 11/1/2013

 What credit score do you need to qualify for a conventional loan? Review the list below to find out what type of conventional loan you can expect to qualify for:

  • 580:    Minimum credit score to qualify for a conforming loan
  • 600:    Accepted by few lenders, requires a larger down payment.
  • 620:    Minimum credit score for 95% financing, to qualify for the lowest down payment.
  • 640:    Typical minimum credit score required by mortgage lenders for conventional loans.
  • 680:    Threshold for borrowers to qualify for reduced interest rates
  • 740:    Minimum score for borrowers to qualify for best interest rates

 

Credit Scores

Score of 580 or below

While some people may qualify for conventional loans with credit scores as low as 580 or even lower for non-conforming conventional loans, borrowers with low credit scores who cannot afford to make large down payments should consider alternatives to conventional loans.

Score of 620-640+

With a credit score of 620, borrowers will qualify for 95 percent financing, reducing the minimum down payment dramatically and making conventional loans a viable option. However, the majority of lenders require a credit score of 640 for borrowers to qualify for conventional loans.

Score of 680 and above

Upwards of 680, borrowers will not be able to further reduce down payment requirements; however, borrowers may qualify for more beneficial interest rates.

Obtaining a Conventional Loan After Bankruptcy:

  • Chapter 7/11– Following a Chapter 7 or Chapter 11 Bankruptcy, borrowers must wait a minimum of 4 years before acquiring a new conventional loan. Under special circumstances, this waiting period may be reduced to two years. However, the new conventional loan may be underwritten after only a year, provided that the borrower presents a letter of explanation and credit history has been adequately re-established.
     
  • Chapter 13– Following a Chapter 13 Bankruptcy, borrowers must wait a minimum of two years from the discharge date or four years from the date of dismissal. If extenuating circumstances are presented, borrowers may reduce the waiting period from the dismissal date to two years.

Multiple bankruptcy filings – After filing for bankruptcy two or more times within a seven year period, borrowers must wait five years before regaining eligibility. With extenuating circumstances, the waiting period is reduced to three years from the latest discharge or dismissal date.

 Obtaining a Conventional Loan After Foreclosure

Borrowers who have undergone a foreclosure must wait seven years before applying for a new conventional loan, however, if extenuating circumstances are presented, this may be reduced to three years.

Obtaining a Conventional Loan After a Short Sale

Following a short sale, borrowers must wait two years to borrow up to 80 percent LTV, four years for 90 percent LTV, and seven years for total eligibility. With extenuating circumstances, borrowers may reduce their waiting period to three years and borrow up to 90 percent LTV for the loan.

Where to get a Conventional Loan

Choosing the right loan program and lender can take some time. Smart home buyers set aside enough time to compare lenders and rates in order to be sure that a loan program is the best choice for their unique circumstances. Even small differences between interest rates could save or cost hundreds if not thousands of dollars over the life of the loan. Patience and persistence can are important assets when looking for a loan.

If you are searching for a conventional loan, take the first step towards a smart conventional mortgage and request a quote from a qualified lender on Lender411.

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About The Author:
Stevie Duffin-Lutgen
Stevie Lutgen is the Senior Editor at Lender411. She manages the site's Authorship Program and social media pages. Stevie graduated from UC Santa Barbara with a BS. Contact her: stevie@lender411com.

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