Credit scores are numerical ratings that lenders use to evaluate a borrower’s creditworthiness. They are calculated based on a variety of factors, including payment history, credit utilization, length of credit history, and types of credit accounts. The most commonly used credit score model is the FICO score, which ranges from 300 to 850. The higher the score, the more creditworthy the borrower is considered to be.

“When it comes to home-buying, credit scores play a significant role in determining whether a borrower will qualify for a mortgage and at what interest rate,” said Josh Kilty, Mortgage Loan Officer with Fairway in Marshfield. “Our experienced mortgage advisers have a keen understanding of the loans that will be the best fit for your unique situation. And one of the biggest factors in finding the loan most suitable for you is your credit score. Based on your credit score, you will be a candidate for some types of loans but not others.”

Credit scores and mortgages have been in the news a lot lately, due to LLPA’s.
Loan-Level Price Adjustments are fees that are added to the interest rate of a mortgage loan, based on various risk factors associated with the borrower and the property being mortgaged. These adjustments are determined by the mortgage investor or servicer and are typically applied to loans that do not meet certain criteria, such as having a lower credit score or a higher loan-to-value ratio.

For example, if a borrower has a credit score below a certain threshold or if the property being mortgaged is considered to be in a high-risk area, such as a flood zone or an area with high foreclosure rates, the mortgage investor may apply an LLPAs to the loan, which will result in a higher interest rate.

Loan-Level Price Adjustments can vary depending on the lender and the type of mortgage being offered, and they can significantly impact the total cost of the loan over time. It’s important for borrowers to understand the LLPAs associated with their mortgage loan and to shop around for the best loan terms and interest rates.

Fairway Mortgage professionals can help home-buyers navigate the credit score requirements for obtaining a mortgage. They can provide guidance on improving credit scores, such as paying bills on time, paying down credit card balances, and avoiding new credit applications. Additionally, they can help borrowers understand the different types of mortgage loans available and the specific credit score requirements for each.

Conventional Loans
These are loans not created by a government entity. Also known as conforming conventional loans, they simply “conform” to the guidelines put in place by Fannie Mae and Freddie Mac. A conventional loan also involves borrowing no more than $548,250. Minimum credit score: 620.

USDA Loans
Insured by the federal government, USDA loans are limited to certain “rural” areas. However, these areas are often near more urban areas. Since this loan is one of the few that requires no down payment, it is known for its affordability. Therefore, it tends to be popular among first-time buyers. Minimum credit score: None officially, but most lenders will require 640 or greater.

FHA Loans
Also backed by the U.S. government, FHA loans offer flexible qualification guidelines that help buyers who may not qualify for a conventional mortgage. This flexibility enables lenders to provide home loans with down payments as low as 3.5% of the purchase price. Minimum credit score: 580 (with 3.5% down).

VA Loans
The U.S. Department of Veterans Affairs (VA) provides this affordable home financing option for service members, veterans and their surviving spouses. Fairway’s minimum credit score for VA-loan eligibility is just 580 — less than the 620 required by many other lenders.

Jumbo Loans
Available for home purchases over $726,200 and up to $2,000,000, jumbo loans require a higher credit score than pretty much any other loan you’ll ever find. Minimum credit score: 680.

Credit scores are a crucial factor in the home-buying process, and Fairway Mortgage professionals can help borrowers understand and improve their credit scores to increase their chances of qualifying for a mortgage and obtaining favorable loan terms. If you’re concerned about your credit score being too low, ask your Fairway mortgage adviser for assistance.