While applying for a mortgage loan, your FICO score plays an important role in deciding whether you are approved for the loan or not. Here are some tips that will tell you what to anticipate from mortgage lenders. For a credit score less than 585, you have to make a down payment of at least 10-20% on the home. You will find it difficult to get 100% financing at this stage.
For a credit score in the range of 585-599, you may have to make a down payment of nearly 5% to be approved for a home mortgage loan. Even in this case, your approval will come from a subprime mortgage lender. You have to approach a lender who deals exclusively in loans for people with not so perfect credit or in situations that cause difficulties in getting a mortgage.
If your credit score lies between 600 – 620, you might be easily approved for 100% financing. Even in this case, you have to approach a subprime lender.
For a credit score of at least 620, you can easily avail of 100% financing, along with a reduced rate of only 1 - 2 percentage points more than the prime rate.
If you have undergone bankruptcy or foreclosure recently, these estimates will still hold true within 2 years after bankruptcy, repossession or foreclosure. After that, getting approval for a mortgage loan becomes simpler as many lenders will consider financing you after 2 years, while before 2 years from the bankruptcy discharge or a foreclosure hardly any lender will give you a second glance. After a 3 year time frame of bankruptcy or foreclosure, it becomes simpler to get an approval. The number of lenders willing to look at your application will increase after 3 years.