Conventional Loans: Taking the Average of the Mid Scores for Two Borrowers

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Filed under: Credit Issues

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This topic isn’t new, but I think it’s worth mentioning since I haven’t shared about it on these videos before. It’s an important topic, especially for people who looking for mortgage options.

Low Credit Score Borrowers

Conventional loans, specifically Fannie Mae, actually allow for an averaging of two client’s low middle scores. Historically speaking, you would use the lowest middle credit score of all the credit scores – regardless of the number of people who are qualifying on the loan.

For example, conventional loans require a minimum 620 credit score. So, if you have a 700 credit score borrower and a 600 credit score borrower, then in the past you wouldn’t qualify for this type of loan because of the 600 score. That’s how it’s always been.

Averaging the Credit Scores

Now, conventional loans through Fannie Mae allows us to take the average. If we use the same example of the two borrowers listed above (scores of 700 and 600), it averages to 650. As a result, you are over the minimum 620 requirement to qualify – which means you may get the desktop writer approval (the automated approval).

Solutions for People Who Need Help with Approval

Who do you know who has had a hard getting approved because of a 600 credit score? If they have 2 borrowers with someone who has a higher score, then we may be able to get it approved. Again, you do have to have automated approval, it’s not something we can get around.

But it’s something that makes me think: how many people have been unable to get a conventional loan because they didn’t meet this limit? Now, we have more options available. This average score method could be something that helps the deal go through.

A lot of times, we just switch these people from conventional loans to FHA loans. But it’s always great to have options, and there are reasons why it’s not always possible to switch to FHA.

This is another example of a potential way to save a deal. Our team at Franklin Loan Center always works with individuals to find the best solutions possible for buying or refinancing a home.

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