Conventional home loans (Fannie Mae & Freddie Mac) have the tightest credit standards for obtaining a home loan. Currently both Agencies charge a “delivery fee”, which is basically an upcharge in rate or fees to offset for credit scores below 740. That’s right I said 740! The amount of the charge is dependent also on the loan to value ratio. For example a home buyer with a 650 Fico score that is making a 10% down payment would have a “delivery fee” of 2.75%…meaning that they would get a higher rate to offset these charges or they would pay that much more in closing costs. These fees are even higher for borrowers that have equity in their homes and want to “cash out”.

Government sponsored loans such as FHA, VA, and USDA have less stringent requiements…the average credit score required by the secondary markets is 640. Frequent exceptions are made with credit scores down to 620, but anything under that is very difficult and at best very rare to even get approved without significant compensating factors and usually a higher interest rate.

The moral of the story is that your CREDIT SCORE is critical. The bottom of the barrell is pretty much 640 these days.

If you have additional questions please feel free to call me at 816-651-8070.

Richard L. Fraser
Sr. Loan Advisor