Which Home Loans Are Offered for Each FICO Score Tier?
Have you ever heard of the term “FICO Score?” It’s a three-digit number that represents your spending habits and ability to pay back loans. FICO scores are one of the most common criteria mortgage consultants use to evaluate whether to issue someone a home loan. But what type of mortgage loans are offered to borrowers from the various FICO score tiers?
Here’s a look at the various types of home loans offered for each FICO score tier.
“Exceptional” & “Very Good” Tiers (740+ FICO Score)
1. Jumbo Non-Conforming Mortgage Loans
Jumbo non-conforming mortgage loans are typically taken out by those wishing to purchase prime real estate. As the name suggests, jumbo home loans have a higher value than other types of mortgage loans. Therefore, the FICO score required to obtain a jumbo loan is among the highest of any mortgage.
The minimum credit score required to take out a jumbo loan is 740 or above. Some mortgage lenders offer jumbo home loans to borrowers with credit scores of 680 or above in exchange for higher premium payments.
2. All Other Mortgage Loans
One of the biggest advantages of having a high credit score is the ability to take out virtually any type of loan! Mortgage companies love lending to borrowers with high credit scores because it isn’t risky.
“Good” Tier (670 – 739 FICO Score)
1. Investment Property Loans
If you want to take out investment property loans, your FICO score must be in the “good” tier or higher. Why? Because investment properties cost more than other types of properties due to their ability to generate a higher ROI. Mortgage lenders compensate for the risk of giving out substantial investment property loans by limiting them to borrowers with credit scores exceeding 670.
The interest charged on investment property loans depends on the borrower’s credit score. The bigger the margin by which your credit score exceeds the minimum 670 requirements, the lower your premiums will be.
2. Mixed-Use Financing
If you’ve ever wanted to buy a building that generates two rental income streams, mixed-use financing is for you! Mixed-use buildings are designed to house both residential and retail tenants. In simpler words, they generate a significantly higher ROI than other types of buildings—which is why they tend to be expensive.
Mixed-use financing is only available to borrowers in or above the “good” FICO score tier because they’re the most likely to repay large loans.
“Fair” Tier (580 – 669 FICO Score)
1. FHA Loans
If you’re interested in taking out a mortgage and you’re in the “fair” FICO score tier, your best bet is to check out FHA loans! FHA loans are available to any borrower with a minimum FICO score of 580. With that said, you must also make a minimum 3.5% down payment to obtain an FHA loan.
If you’re thinking of taking out an FHA loan and your credit score exceeds 580, we recommend sitting with a licensed mortgage lender to negotiate the interest on your loan. In some cases, you might be eligible for lower premiums if your FICO score is closer to the upper limit of the “good” FICO score tier than the lower limit. For instance, a borrower with a FICO score of 660 is more likely to land an FHA loan at a low-interest rate than a borrower with a FICO score of 580.
2. Conventional Loans
We’ve put conventional loans in the “fair” FICO score tier section of this article—but we almost had it higher up! The main reason why is because conventional loans are typically offered to anyone with a FICO score of 620 or above. In other words, being in the “fair” FICO score tier isn’t enough to take out a conventional mortgage loan.
It’s worth noting that the higher your credit score, the lower your down payment, and premium requirements will be if you choose to take out a conventional loan.
“Poor” Tier (579 or Below FICO Score)
VA Loans
If there’s only one type of home loan borrowers in the “poor” FICO score tier frequently apply for, it’s VA loans. VA loans are offered to members of the armed forces as an employment benefit. Therefore, there’s no need to settle a down payment or provide a credit report if you want to apply for a VA loan.
Bad Credit Mortgage Loans
If you aren’t in the military and your FICO score is below 579, the only type of mortgage you can take out is a bad credit home loan. One of the most popular types of bad credit home loans is NINJA loans. Unfortunately, it’s extremely difficult to find a mortgage lender willing to issue NINJA home loans because they’re too risky and could pose a threat to the national economy.
Atlantic Home Capital Provides Mortgage Assistance to Members of Every FICO Score Tier
Whether you’re in the “exceptional” or “poor” FICO score tier, if you want professional advice on what type of home loans you qualify for, contact our team at Atlantic Home Capital today.
We’re a licensed mortgage lender in New York that offers everything from FHA loans for borrowers with fair credit scores to investment property loans and jumbo home loans for borrowers with exceptional credit scores. We also provide comprehensive mortgage refinancing services to help clients obtain cash-out, cash-in, or rate and term refinancing.
Ready to let an experienced team of mortgage consultants help you apply for home loans in New York? If so, drop us a message using our online contact form today!
