Many people ask about the cutoff or the lowest score permitted to be able to obtain 100% financing. There used to be lenders who would go down as low as a 500 credit score for 100% mortgage financing. However, now most lenders require a minimum of a 620 middle credit score to obtain 100 percent home mortgage loan financing. There are many exceptions to this cutoff, however this will give you a good idea as to what most lenders are looking for.
There are many programs available that are not credit score driven, instead they are based on your credit profile. However, many of the same items that drive your score lower may also prevent you from obtaining this type of loan. Consult with your mortgage professional about the many programs available that are not based on your credit score.
100 percent financing has become increasingly popular over the last 5+ years or so. While you can usually obtain a mortgage for 100% financing with a credit score as low as a 620, you may also want to consider trying to save up anywhere from 3-10 percent for a down payment to even increase your chances of being able to qualify for a mortgage. You can use your tax return, a loan or withdrawal from your 401k, money you have in your savings account, or from a variety of many other sources to come up with a down payment if you don't qualify for 100% financing.
Yes, you may qualify for 100 percent financing with a FICO score as low as 500, but it is important to remember that you will be required to prove your income with full documentation in most cases.
Purchasing your home with a 100% loan has been popular recently but remember you will be using a large amount a leverage that can create more risk in the loan. If you purchase your home with a 100% loan and the home price decreases you may owe more than the value of the home.
The Lowest score for a 100% mortgage loan has risen this past year due to the increased risk to lenders. Getting a 100% financing loan is still possible if your credit is very strong and you can document all your income and have excellant reserves.
You may also consider asking your mortgage professional about the Freddie Mac Home Possible loan program if you are interested in receiving a 100% loan for a purchase or no cashout refinance. This program is available to anyone as well as teachers and public service officials. While approvals through this program are available at any credit score, your total income, debts, and payment history will be taken into account.
If you have a lower credit score ask your broker about FHA loans. FHA loans really have no minimum score requirements and are underwritten manually so there is room for flexibility. Although even with a low credit score you will need to prove financial responsibility to qualify for an FHA loan. This can be done by showing timely payments on phone bills, rent and similar accounts. If you have re established your credit and are now making timely payments on your credit accounts this will help you qualify as well.
Some mortgage programs allow you to receive a gift of equity in the property that you are purchasing as long as it is a non-armslength transaction, such as purchasing the property from a family member or employer. FHA mortgage programs also allow you to receive sweat equity in the dollar amount equal to the amount of work that you have done to the property during its construction.
Ask your mortgage professional about the Fannie Mae Flex 100 program or the Fannie Mae MyCommunity home loan. Both of these programs allow for 100% financing and with compensating factors can often be approved with credit scores below 620.
Down payment assistance programs can also help you get into a home with out money down. Certain lenders allow cash gifts from family members and using creative financing methods such as seller carry financing can enable you to use very little or none of your own funds for a mortgage loan.