mortgage requirements | My Supreme Team

What Are Supreme Lending Credit Score Requirements?

by Supreme Lending | Nov 3, 2024

An Overview of Supreme Lending Credit Score Requirements

When you’re preparing to buy a home, understanding the mortgage credit score requirements is essential. Your credit plays a significant role in determining your eligibility for various loan programs, as well as interest rates you may qualify for. Our goal at Supreme Lending is to provide the smoothest mortgage experience possible, that includes guiding you with transparent information to help you to make an informed, confident decision. Here’s an overview of Supreme Lending’s credit score requirements for common loan programs and frequently asked questions.

Conventional Loans

Conventional loans are popular among homebuyers due to their flexibility and competitive interest rates. As a general rule of thumb, Supreme Lending requires a minimum credit score of 620 for Conventional loans. However, a higher score typically results in securing more favorable rates and terms.

FHA Loans

Insured by the Federal Housing Administration, FHA loans are another common mortgage option –especially for first-time homebuyers or borrowers with lower credit. These loans have more lenient credit score requirements, accepting as low as 580.

VA Loans

For eligible military Veterans and active-duty personnel, VA loans offer affordable options as they don’t require a down payment or mortgage insurance premiums. Like FHA loans, Supreme Lending’s credit score requirement for VA loans is a minimum of 580.

USDA Loans

Guaranteed by the U.S. Department of Agriculture, USDA loans provide affordable financing designed for homebuyers in designated rural areas with no down payment required. In general, Supreme Lending’s credit score requirement for this program is 600.

Jumbo Loans

Jumbo loans are used to purchase high-value properties with a loan amount greater than conforming loan limits, which is $766,550 for one-unit homes in 2024. Due to potential higher lending risk, Jumbo loans typically have stricter qualifications. Supreme Lending has jumbo programs with a minimum credit score of 680, but depending on the loan guidelines, some may require at least a 720 credit score or higher.

Frequently Asked Questions

Now that you have a snapshot of common credit score requirements at Supreme Lending, here’s some more insight on how your credit can impact your mortgage.

How is a credit score determined?

A credit score, often represented by a FICO® score, is a numerical assessment of a borrower’s financial health. It is calculated based on several key factors:

Payment History: Your record of on-time payments versus late or missed payments.
Credit Utilization: The amount of credit you’re using compared to your total credit limits.
Length of Credit History: The duration of time you’ve had credit accounts open.
Types of Credit in Use. The variety of credit accounts you have, such as credit cards, mortgages, and car loans.
Recent Credit Behavior. This includes how many new credit accounts you’ve opened recently and credit inquiries.

Combining these factors provides a numerical score to help reflect your creditworthiness.

What qualifies as a generally “good” credit score?

In general, a credit score of 670 to 739 is considered good according to FICO® standards. Scores in this range suggest that you are a responsible borrower with a solid history of managing credit well. 740 or higher is considered very good or exceptional. Remember, a higher the credit score usually results in more favorable mortgage rates and terms.

Additionally, a credit score between 580 and 669 is considered fair. This range aligns with many of the credit score requirements outlined above depending on the loan type. So don’t fall victim to the common mortgage myth that you need perfect credit to qualify for a home loan.

What’s the difference between a soft credit pull and hard credit pull?

When applying for a mortgage, lenders need to pull your credit report. There are two ways to do this:

A soft credit pull is a credit check that doesn’t affect your credit score. It’s typically used for pre-qualifications or when you check your own credit. Supreme Lending has this option when you get pre-qualified for a mortgage.
A hard credit pull, on the other hand, occurs when a lender reviews your credit score as a formal credit application during the loan approval process. Hard pulls can temporarily lower your credit score by just a few points. However, there’s no significant impact, which is another mortgage myth to debunk.

Here to Help

Don’t navigate the mortgage process alone! Our experienced and knowledgeable team at Supreme Lending is here to help you understand all aspects of your homebuying journey. From understanding credit score requirements and determining which loan program may work for you to our seamless underwriting process, we help you close your loan with confidence.

Mortgage LTV: What Is a Loan-to-Value Ratio?

by Supreme Lending | Jul 18, 2024

When it comes to securing a mortgage, a key factor that lenders consider when evaluating a borrower’s lending capacity is Loan-to-Value (LTV) ratio. Understanding mortgage LTV, how it’s calculated, and how it can impact your mortgage can help you make informed decisions during the homebuying process. Let’s dive into the details of LTV ratios and why they matter.

What Is Loan-to-Value (LTV) Ratio?

The LTV ratio is a financial term used by lenders to assess the risk of a loan. It compares the loan amount to the appraised value of the property being purchased or refinanced.* The LTV ratio is expressed as a percentage, demonstrating how much of the property’s value is being financed through the mortgage.

*By refinancing an existing loan, total finance charges may be higher over the life of the loan.

How Is Mortgage LTV Calculated?

The LTV ratio is calculated using the following formula:

For example, if you’re purchasing a home with an appraised value of $300,000, and you’re borrowing $240,000, the mortgage LTV would be 80%:

How LTV Relates to Mortgage and Homebuying

LTV ratios play a crucial role in the mortgage approval process. Lenders use LTV to determine the level of risk associated with a loan. A lower LTV signifies lower risk, as the borrower has more equity in the property. Consequently, a higher LTV indicates higher risk for the lender, as the borrower has less equity.

How to Measure Mortgage LTV Ratios

A fair LTV ratio is typically 80% or lower. An LTV ratio of 80% or less is favorable because it often means the borrower is not required to pay for private mortgage insurance (PMI), which is usually mandatory for higher LTV ratios. PMI protects the lender in case of default but adds extra cost for the borrower.

LTV Requirements by Common Loan Types

Loan-to-Value criteria depends on the type of loan. Here’s a breakdown of common LTV limits to keep in mind:

Conventional Loans:
- Maximum LTV: 80% to avoid PMI
- With PMI: Up to 97%
FHA Loans:
- Maximum LTV: 96.5% for borrowers with a credit score of 580+
VA Loans:
- Maximum LTV: 100% (no down payment required for eligible Veterans)
USDA Loans:
- Maximum LTV: 100% (no down payment required for eligible rural properties)

Frequently Asked Questions About LTV Ratios

How Can I Lower My LTV?

You can lower your LTV ratio by making a larger down payment or by choosing a less expensive property relative to the loan amount.

Does a High LTV Affect the Mortgage Interest Rate?

Yes, a higher LTV ratio may result in higher rates because it can be seen as a higher risk for the lender. On the other hand, a lower LTV may qualify for lower rates.

What If My LTV is Above 80%?

If your LTV ratio is more than 80%, you may be required to pay mortgage insurance. This adds protection for the lender and an additional cost to the monthly mortgage payment.

Can LTV Ratios Change?

Yes, Loan-to-Value ratios can change over time as you pay down your loan and as the value of your property increases.

Understanding mortgage LTV is important to making informed decisions about your home financing. By knowing how your Loan-to-Value is calculated and its impact toward your mortgage, you can better navigate the homebuying process and know what to expect.

Our experienced and knowledgeable team at Supreme Lending is committed to helping you achieve your dream of homeownership with confidence and ease. Contact us today to learn more about your loan options and get pre-qualified today.