Conventional Financing - One Notch Tighter

The belt is getting one notch tighter for borrowers seeking conventional financing. While not across the board, the trend is moving toward a minimum 660 credit score in order to qualify for a conventional loan. We are hearing from various lenders that this change is either being applied now or will soon be.


In addition to the minimum credit score requirements, conventional mortgage lenders are enforcing stricter guidelines when a borrower's credit history is reporting a bankruptcy, foreclosure or short sale*:

• Chapter 7 Bankruptcy; minimum of 4-years since discharge or dismissal and 680 credit score
• Chapter 13 Bankruptcy; minimum of 2-years since date of discharge and minimum 4-years since date of dismissal and 680 credit score
• Foreclosure; minimum of 7-years from completion date and 680 credit score
• Short Sale; minimum of 2-years from time of sale and 680 credit score

FHA insured mortgages, on the other hand, are a bit more forgiving:

• Chapter 7 Bankruptcy; minimum of 2-years since discharge or dismissal and 620 credit score
• Chapter 13 Bankruptcy; consideration may be giving after 1-year
• Foreclosure; minimum of 3-years from completion date and 620 credit score
• Short Sale; left to lender discretion and overall credit profile

Unfortunately, our economy has introduced these circumstances to more potential borrowers. The best advice we can give our clients is to seek appropriate counsel and leadership when they are faced with credit challenges. In addition, our clients need to prepare a sound financial plan for their futures and have an understanding of path to financial success.