Texas Mortgage Refinance at low FICO Score

Scenario: I am looking for a refinance loan worth $400,000 in Texas. It�s a single family residential property and I would prefer 90% LTV. My FICO score is 605. The property is my primary residence. Can I refinance at such a low score and will it do if I can show only 12 months of personal bank statements.

Solution: Your credit score may be low but you can still apply for the refinance. However, under Texas A6 law, you can take out a refinance loan for up to 80% loan to value ratio.

Considering that you have a low FICO score, you can go for a Texas Mortgage conforming loan (that which stays within the limit stated by Fannie Mae and Freddie Mac). Such loans are not score driven and as such you may get the same interest rate at an 800 score as in a 600 score.

Besides checking your score, lenders also consider the down payment, cash reserves, and the housing and debt-to-income ratios. It is true that they require you to have a minimum credit score but when it comes to conforming loans, lenders do not disapprove loans just because your score is low. However, bank statements are not enough to help you qualify for conforming loans. You will need to submit the pay stub for the past 1 month, W-2 forms for the past 2 years and other documents as required by the lender.

Generally, most people have the idea that a low score would require them to pay a higher interest rate and therefore they stay away from applying for a mortgage. But lenders providing conforming loans do not decide upon the interest rate based upon your credit score only. Instead, they may require you to pay a certain amount of charge known as Risk Based Pricing depending upon your entire credit profile and not merely your score. However, you may try out various other options such as FHA insured loans, programs offered by the ACORN and the NACA.

By : Samantha Taylor