Patrick: Hello and welcome back guys to the Real Estate Stew with the “What’s Cookin?” crew. I’m Patrick.
Kiesha: And I am Kiesha.
Patrick: Kiesha! You know, it’s a little cool outside. But wow, you’re certainly looking nice today …
Kiesha: Thank you.
Patrick: … there young lady.
Kiesha: We are in Houston and in Houston, Texas we get one, maybe two, days of cold weather and when those days come around, I have to whip out my best because I only get a chance to wear them once or twice.
Patrick: Well, you know, I just – my wife, I have to admit guys. Whenever you all see the videos and you’re like, “Oh, what in the world is Patrick wearing today?” that means I dressed myself. Other than – OK. See, ya’ll get it. So I love these days because I get surprised, I’m like what does my wife have for me today?
Kiesha: What am I wearing today?
Patrick: So Kiesha, questions!
Patrick: You know, we’re always getting great questions from you guys. So let’s look and see what we have today.
Kiesha: And thank you so much for your great questions. Let’s see. Today we are addressing – we have a viewer who wants to know, “Is it possible for someone with a 590 credit score to buy a home?”
Patrick: Oh! Five-ninety. OK. Excellent question.
Kiesha: That question is very specific. So a 590 credit score. I guess I want to say I’m assuming that the question was sent our way because the belief is a 590 credit score is considered relatively low and because a 590 credit score is considered relatively low for this particular buyer, it feels like they don’t have the options that they need.
Patrick: So here’s what I would say because I get that question a lot. So guys, understand when it comes to credit scoring, lenders have their – what you call FHA, conventional, VA, your loan programs and there are some standard guidelines across the board for all lenders with these different programs, right?
Patrick: But lenders can layer those guidelines.
Patrick: You know, so for instance, FHA, typically the standard guideline is hey, we want to see a minimum credit score of 580.
Patrick: OK? But a lender could come along and say, “Hey, no problem. But if I’m going to loan you money, my money, I want a 600.” So for all – but now they have to be fair. We can’t just – so if you say 600 is what the score needs to be, then it’s going to be 600 FHA for all applicants across the board.
Patrick: So back to the point here with the question. So if we’re thinking just score like the bottom – you know, Mr. King, Kiesha, will a 590 work? Well, guys, there are lenders that I know, Kiesha, have gone as low as 580 for most lenders. So you can actually get approved guys for a loan with 580. Now there may be some compensating factors and other things that you will need to have in line with that loan in order for it to work out with the lower scores. But yes, you can. Now, also if you’re a veteran, VA, I’ve had veterans get approved even below the 580.
Kiesha: Yes. The VA does not have a minimum credit score requirement.
Patrick: There we go. Did you all hear that? OK, important to know. So veterans, excellent, you don’t need to worry about that 580. You can go even lower. We definitely recommend you reach out to some lenders that are very familiar with the VA programs like USAA. I guess I can plug – do that, right?
Kiesha: Looks like you did.
Patrick: USAA and there’s plenty, Navy Federal, et cetera, et cetera. But back to the score, so 590. I would say think 580 low across the board unless you’re a veteran and most lenders, I’ve seen 600.
Kiesha: I’ve seen 500.
Patrick: OK, OK, 620, 640. But guys, on a serious note, if you came to me and said, “Patrick, what do you recommend? Where do you think we really need to be?” I’m going to tell you that a good target score would be about 620. Most people with a 620 I see with lenders all day long.
Kiesha: Maximize your output.
Patrick: Maximize – with great, great interest rates, et cetera. So you want good terms. If you’re going to purchase, I want to see what’s in good terms. So I will say target 620. If you get a 640, even better. But I have seen some 600s. But normally about 620, 640. But yes, short answer to the question is 590 would work.
Kiesha: That was the short answer.
Patrick: OK, Kiesha, we’re having a talk. No –
Kiesha: So the one thing that I will add to that short answer is when you as a buyer are evaluating your own credit score – because oftentimes, we find that buyers will come to us and they will say, “I have a 590 credit score,” and they’re basing that on something that they pulled themselves.
Keep in mind that lenders look at not one credit score but three and they will base their lending decisions on the median credit score. What is the median credit score? The median credit score is the one that falls in the middle when you line the scores up numerically.
So in numerical order, the one that’s in the middle at that point. They don’t average them. They don’t take the highest. They don’t take the lowest. They take –
Patrick: Now Kiesha, I’m listening to you. But, you know, people are visual. So can – they’re like, “Numerical order?” You line them up. So example, give an example. How about five, six, seven, right, Kiesha?
Patrick: Five, six, seven.
Kiesha: Six is in the middle.
Patrick: Six is in the middle. So 500 is the lowest out, 700 is the highest out. The one that’s left, 600, that’s your median score.
Kiesha: Absolutely, absolutely. So you want to just make sure that you’re evaluating the right credit and also keep in mind that the score that you see as a borrower, if you’re pulling from some of the secondary sites, may differ from what the lenders see. So just make sure that before you make a decision regarding whether or not you can buy based on a credit score, that you’ve seen on your own. Get that validated with your mortgage company.
Patrick: Yeah, very important.
Kiesha: Did we forget anything?
Patrick: Kiesha, I think you covered everything.
Kiesha: I did.
Patrick: In your short response.
Kiesha: I did. So we always want to thank you all for sending in your questions. We want to remind you to send additional questions to email@example.com.
Patrick: And don’t forget guys. We want you to like us.
Patrick: And comment, guys.
Kiesha: Also, real quick, shout out to Perry Homes. We are in one of their lovely models here in the South Lake community. We always want to thank our sponsors, our model home sponsors that allow us to come in and invade their spaces for a day. So thank you guys. You all have a great week.
Patrick: See you next time, guys.