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My fiance and I are trying to buy a home, told 650 credit score isn't enough???

We have no bankruptcies, student loans, etc.  He has been at his job for 2+ years making $33K a year, and we own our vehicles with no installment loans.  His credit score 3 months ago was 629, and is currently at 650 and climbing after obtaining two secured credit cards and only using 30% of the available credit.  I feel like we are doing everything correct.  Why are we told that we cannot buy a house until we continue this trend for a year or more??  
  • August 19 2013 - Baltimore
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Answers (9)

Most lenders look at several components to approve a mortgage, one being FICO score, the others being debt to income ratio and how long the applicant has been employed in the same field (most lenders require employment in the same field for a minimum of 2 years). Also, depending on the type of mortgage (i.e. FHA) the underwriter requires that funds for down-payment must be available and a certain amount cannot be gifted but must come directly from the buyer. I don't know the details of your financial situation nor the lender, but I encourage you to contact other lenders and explore all the different types of loan programs available to you and individual requirements by each lender. If you know anyone who has recently purchased a home, they may be able to recommend a good mortgage company to you. 
  • August 21 2013
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Profile picture for edboner
I worked with a mortgage company at one time and lenders are different. Some lenders have an internal overlay above and beyond FNMA guidelines.   Some might say the bottom is in the low 600's, some 580.  Qualifying is not as simple as looking at a credit score alone....or income...or debt.

Bottom line....make a few calls to other local lenders, you might find a different answer.  With today's rates, don't miss an opportunity because you stopped at the first "NO". 
  • August 20 2013
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Every lender can be different when it comes to minimum credit scores. Although you seem like you are on the right track in building up your credit, you should shop around and look at more than one lender. Some lenders can go as low 580 and some may want a credit score as high as 680, it just depends. So keep working on your credit score because it will always be to your future benefit and shop around for different lenders as well. 

Hope this helps! If you found this comment helpful please feel free to leave me a review!

Good Luck!
  • August 20 2013
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Without all the information necessary, I am unable to give you an answer in stone, but it sounds like you may qualify for a VA, FHA, or USDA loan presently...however, Fannie and Freddie do require longer tradeline time frames.
In your case, it seems it is not the score holding you back, but the age of your tradelines.
We at American are happy to help you further, feel free to contact us through my contact page here on Zillow.
Best wishes, Jim
  • August 20 2013
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Good morning,

Most Lenders today require a minimum 640 credit score to qualify for mortgage financing.  There are Lenders who qualify at lower scores.

BUT in the current lending environment it is NOT ENOUGH to have the sufficient credit score.  A prospective home buyer must also meet minimum standards for credit history.  

In most cases these minimum standards include 2-3 credit accounts (or trades) that are open and active for 12- 24 months.  These accounts or "trades" include: revolving credit cards, retail store credit cards, installment loans (including student loans in repayment, car loans, and etc.), time shares and mortgages.  In the industry we call this an overlay above basic guidelines and the overlays can be different from one Lender to the next.  But in general this is a minimum standard for almost everyone lending mortgage money today.

Therefore---based on your statement above---it appears you do not meet the minimum standard for open and active credit.

Watch for me discussing this very concept on Yahoo! Finance's "Destination Home" coming up soon.  
http://finance.yahoo.com/topics/destination-home/

Trevor Curran
NMLS #40140
[deleted by Zillow  moderator. Please see our Good Neighbor Policy for posting guidelines]
  • August 20 2013
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That sounds like a lender overlay.  Overlays are rules that mortgage lenders layer on top of the guidelines set by FHA, USDA, VA, Fannie Mae and Freddie Mac in order to increase loan performance.

With a 650 score, I could provide FHA financing with no overlays for the number of trades or length of time established.

I am closing 2 purchases this month in very similar situations.

Please feel free to message me with any detailed questions.
  • August 19 2013
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The reason we heard from a lender recently was that we did not have trade lines established for a long enough period of time.  Other than that we have no other detrimental issues.  We are completely stumped.  
  • August 19 2013
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That doesn't make much sense. Unless there's something not being mentioned, you really should talk to another lender. I'd be happy to supply you with a few names of reputable, local lenders. Mark Simone Remax Preferred [phone number deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]
  • August 19 2013
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Pay the cards to 0 balance and put them away you score will go up!
  • August 19 2013
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