700 credit score cant get 10% down 2nd home loan?? need 740?

Question

Hi, i am trying to purchase my first STR. I thought i had found a lender but after running the numbers, was told i need a better credit score. has anyone ells had this problem or found a lender that will do 10% down with 700 credit score? please help thank you!

Jay Hurst · Answer

@Brandon Vaughan    What you are likely running into is a loan level pricing adjustment (LLPA) issue. LLPA's are what Fannie and Freddie charge to deliver a loan to them.  The LLPA are a set of matrixes based on property type, credit score and loan to value. The higher the loan to value or lower the score the higher the LLPA which pushes up the rate. 10% down second homes have VERY large LLPA adjustments of 4.125.  See second home line in the middle of this snip:

with a 700 credit score and 90% loan to value you also have a 1.00 adjustment vs a .250 adjustment for 740 or higher. see snip:

so, likely your lender cannot simply do a loan with those combined adjustments because the required rate/costs are not offered.  If you can possibly put down 20% in would be doable but also a lot cheaper for you.

Leslie Anne Morris · Answer

740 appears to be the ‘good credit’ tier. I have other lenders who say the same thing.

Marc Dube · Answer

DU is Desktop Underwriting which is an automated underwriting system. If you don’t get the DU approval you most likely won’t get the loan

Marc Dube · Answer

you can do a 2nd home purchase with 10% down and a 700 score,  but John is correct. You'll need to show that the 2nd home is in what a typical 2nd home area would be and meets the distance requirement. You'll also need to carry pmi and at least 6 months reserves...the loan will also need DU Approve so if theres anything an underwriter would see that would call anything into question then you're back into 20% + down as an investment property

Jay Hurst · Answer

@Brandon Vaughan   Well, all lenders have different "max" rates on their rate sheets.  Pricing it out I can do it, but pricing will be ugly.

Andrew Steffens · Answer

@Tyler Solomon can you help?

If not, and if you are looking in FL, I have some lenders that can help.  Good luck!

Jay Thomas · Answer

Having a credit score of 740 or higher is widely seen as the benchmark for having good credit. This is something that I have heard from many different lenders, so it stands to reason that this is commonly seen as a good credit tier. It's important to build and maintain your credit in order to get access to better loan rates and other financial opportunities. That's why understanding what makes up good credit is essential!

It can be daunting at first, but with a little bit of knowledge and diligence, you can make sure you're on the right track. Doing things like making timely payments, keeping balances low on your cards, and monitoring your accounts for accuracy are all great steps toward cultivating good credit. You've got this!  Good luck!

Reid Chauvin · Answer

@Brandon Vaughan - it's worthwhile to try with another lender or 2. Different lenders have different layovers/risk appetites. Your credit score alone should make you eligible for a 2nd home loan, but as others alluded to, there are other factors that exist as well. You are definitely going to have to pay some discount points for your rate, which requires more money upfront. Where are you looking to buy?

Brandon Vaughan · Answer

@Jay Hurst  Thank you. I do believe this is what the lender was trying to explain to me was the issue. So if my understanding is correct, no one can qualify for a 10% down secondary home loan with a 700 credit score at the moment?

Brandon Vaughan · Answer

Thanks everyone for you input. I do meet the distance requirements ect. what is DU approved?

700 credit score cant get 10% down 2nd home loan?? need 740?

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