September 27, 2019 Kristen Godel

Credit Scores: What the Heck do I Really Need to get a Mortgage?

Credit score (now referred to as ‘FICO score’) requirements for mortgages have changed over the last 24-36 months. So how do you know what credit score is required to achieve your home ownership goals? Well here’s a quick/simplified breakdown of what different tiers of banks are looking for:
Credit score 680+: Gives you ALL traditional big banks/insurers as options. Minimum 5% down payment. Allows the highest debt ratios (higher mortgage affordability). Best rates & promos advertised

Credit Score 650 – 679: Gives most banks/insurers as options. Minimum 5% down payment. 2nd tier of debt ratios (slightly lower mortgage affordability than 680+). Minimum 5% down payment on the purchase price. Best rates & promos advertised.

Credit Score 550 – 649: Alternative lending institutions (B lenders). 20% down payment needed. Rates with alternative lenders are slightly higher. (Credit scores of less than 650 do not automatically push you to alternative lending, but in most cases, there is something effecting your score; high balances/utilization, collections, late/missed payments).

Credit Score less than 550: With credit scores less than 550, the mortgage request will need to be reviewed on a case by case basis. There is an array of reasons that can cause a score to be this low (high delinquencies, multiples collections, unpaid accounts, bankruptcy, etc.). There is no hard and set rule, but often alternative lenders will scale back their mortgage loan to compensate for the risk perceived. This could mean the need for an even larger down payment. If alternative lenders decline to help, private lending will likely be an option for the mortgage.

For more information, don’t hesitate to reach out to us today! (905) 455-5005.