What Is The Minimum Credit Score To Obtain a Mortgage in Florida?

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Minimum Credit Score To Obtain a Mortgage in Florida

Many people are looking for a house before actually checking their credit score (FICO). So what is the minimum credit score to obtain a mortgage in Florida? Florida covers 65,755 square miles it is the third most populous state with almost 20 million who call Florida home. The capital of Florida is Tallahassee and the median home value for the state of Florida is $217,300.  The Atlantic Ocean is the eastern coastline of Florida with Alabama and Georgia along the northern border with the Gulf of Mexico along the panhandle. A popular tourist attraction as well as the choice for many who choose to retire and relax in a more temperate environment choose to head to the state of Florida. In fact, the Greater Miami area is the only metro area in the United States whose borders touch two national parks, the Everglades National Park and Biscayne National Park.

In 2017, prices for homes in Florida saw a respectable increase from 2016 primarily due to the lack of new construction for new properties. The condominium trend, especially in the Miami area has stabilized and there is much less speculative construction. As demand picks up as we enter buying season, we can anticipate home prices to continue to rise, although not as fast a pace as seen in 2017. Higher interest rates will also be a factor and analysts are predicting mortgage rates to hit 4.5% by years end.

The FHA Option For Minimum Credit Score To Obtain a Mortgage in Florida

FHA doesn’t approve loans but FHA approved lenders do. Lenders accept an application to buy and finance a home and by following the FHA requirements, the loan is eligible for sale in the secondary market and also comes with an inherent loan guarantee. Should the loan ever go into default the lender is compensated for the loss. This compensation is financed by two separate mortgage insurance premiums, an upfront premium that is rolled into the loan amount and an annual premium paid in monthly installments.

One of the guidelines that FHA requires is a minimum credit score for its loans. What is a minimum credit score to obtain a mortgage in Florida For 2018?  These guidelines have been relaxed.  The minimal FICO for FHA loans is 500. The minimum credit score for those coming to the closing table with the minimum down payment of 3.5% of the sales, price, the minimum score is raised to 580.

Conventional loans on the other hand, those underwritten to standards set forth by Fannie Mae and Freddie Mac make it more difficult to qualify with a lower down payment. For example, a majority of lenders won’t approve a conventional loan with a 5.0% down payment if the credit score is below 680. For credit scores reaching 640, the minimum down payment can be 25% of the sales price of the home. Qualifying requirements for low down payment conventional loans are also more difficult when compared to an FHA loan. Over the years, FHA loans have met the needs of those who

  • Are considered lower income
  • Need a non-occupying co-borrower
  • Need some financial assistance for the down payment and closing costs
  • Are buying a property that needs some repairs
  • Income from non-traditional sources

FHA loans have been helping borrowers buy a home since 1934 when the program was first introduced. And because of the low down payment needed and relaxed credit guidelines, it is often the loan of choice for those buying their very first home.

Lender Requirements

Okay, let’s circle back and talk about credit scores once again and how to qualify with a lower score and what is a minimum credit score to obtain a mortgage in Florida?. First, it’s important to note that just because the FHA establishes a minimum score that doesn’t mean an individual lender will follow it. Here are the various scores FHA requires based upon the amount of down payment:

  • 580 with a 3.5% down payment
  • 500-579 with a 10% down payment
  • <500, not available for an FHA loan

However, lenders typically won’t approve a loan with a FICO score of 500. A 500 score indicates there are some credit issues that still need to be resolved. Most lenders today ask for a minimum credit score to be in the 620-640 range before credit can be approved.

If someone with a credit score of 620 applies for an FHA loan and makes a 3.5% down payment, the loan is eligible for an approval. With a conventional loan and a 5.0% down payment, a lender could consider the approval but the interest rate could be adjusted higher by as much as a full percentage point, making it more difficult to qualify for.

In today’s mortgage marketplace, lenders are more likely to approve a loan application with lower scores than they were just a few years ago. As lending guidelines have stabilized and foreclosures and default rates have receded, more loans with lower credit scores are being approved.

This is especially important for someone who applied for a loan just a year or two ago and was told they couldn’t qualify based on their credit scores but what is a minimum credit score to obtain a mortgage in Florida? Many could have simply given up thinking they could never qualify. But even if those very same individuals had the very same scores today that they did say a couple of years ago, because of recent changes in underwriting guidelines they might very well be approved for an FHA loan. The important thing to do is to take the first step and speak with a lender who can provide the latest updates on available loan programs in today’s marketplace.

Contact with any questions – Matt Herbolich, MBA, JD, LLM by phone or text at 786.390.9499 or by email at mherbolich@usa-mortgage.com. Mr Herbolich works when you work, so feel free to contact him any time.

Matthew Herbolich
Matthew Herbolich
Mr. Herbolich is a Senior Loan Officer at USA Mortgage, a division of DAS Acquisition Company, LLC NMLS 227262. He is an expert not only in lending but multiple facets of real estate, particularly the title industry. Matt Herbolich trains his fellow loan officers on title industry topics, real estate investing, and countless mortgage guidelines. Have any questions? Call at 888-900-1020 or send email to: mherbolich@usa-mortgage.com

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