• Preston Morris

What FICO score is used for construction loans?


What FICO score is used for construction loans?

To reduce their risk, lenders require borrowers to have a credit score of 680 or higher to qualify for a construction loan. That's just the minimum, as some lenders may require a score of 720 or better. Follow us!


What Is a Construction Loan?

“A construction loan is short-term financing that can be used to cover the costs associated with building a house from start to finish. Construction loans may cover the costs of buying land, drafting plans, taking out permits and paying for labor and materials. You also can use a construction loan to access contingency reserves—if your project is more expensive than you planned—or interest reserves, for those who don’t want to make interest payments during construction.”


How Construction Loans Work

“Construction loans let future homeowners borrow money to purchase materials and pay for labor necessary to build a home. Often, this money also can be used to purchase the land you’re building on; however, if you already own the land, you may be able to use the property as collateral for your loan. Because construction loans generally are intended to cover the building process, they’re typically issued for a period of 12 to 18 months. That said, some loans automatically convert into a permanent mortgage once construction is complete.”


What is the minimum credit score for an FHA loan?

An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range. Curbie & Bessie requires a minimum credit score of 580 for FHA loans.


Borrower eligibility:

  • Down payment of at least 3.5%. This is the minimum for FHA financing

  • Credit score of 640 or higher. Technically, you only need a 580 FICO score to qualify with FHA. However, Preston Morris says that in his experience, a higher credit score of at least 640 is usually needed for the FHA construction program

  • Clean credit history. You must not have experienced bankruptcy in the last two years

  • Debt-to-income ratio (DTI) below 43%. That means your monthly debts – including future mortgage payments – don’t take up more than 43% of your monthly pre–tax income

  • You will need to verify two years of employment and income. For W–2 borrowers, that means the last 60 days of pay stubs, the last two years of W–2s, and your last two annual tax returns. Self–employed borrowers will need to provide the last two years of full personal and business tax returns as well as all tax schedules involved.

Can I buy a house with a 630 FICO score?

If your credit score is a 630 or higher, and you meet other requirements, you should not have any problem getting a mortgage. Credit scores in the 620-680 range are generally considered fair credit. There are many mortgage lenders that offer loan programs to borrowers with credit scores in the 500s.


Is 690 a Good FICO score?

A 690 FICO® Score is Good, but by raising your score into the Very Good range, you could qualify for lower interest rates and better borrowing terms. A great way to get started is to get your free credit report from Experian and check your credit score to find out the specific factors that impact your score the most.

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