What are the credit requirements for a HECM?

There is no target credit score required to get a HECM. In most circumstances, credit history, specifically payment patterns over the previous two years, holds more weight than the credit score.

In general, borrowers whose credit is considered satisfactory have:

No “major derogatory credit” notices on revolving accounts for the previous 12 months. Major derogatory credit on revolving accounts includes any payments made more than 90 days after the due date, or three or more payments made more than 60 days after the due date

Made all housing payments on time for the previous 12 months with no more than two 30-day late payments in the previous 24 months

Made all installment payments on time for the previous 12 months with no more than two 30-day late payments in the previous 24 months

“Major derogatory credit,” according to the Federal Housing Administration (FHA), includes any payments on revolving accounts (i.e., credit cards) made more than 90 days after the due date or three or more payments made over 60 days after the due date.

Other credit issues that will impact your application, even if they happened over two years ago, include:

Judgments

Collections

Charge-offs

Delinquent federal non-tax debt

Delinquent federal tax debt

Delinquent FHA-insured mortgages

Judgments against you must be resolved or paid off before or at closing. If they are not, you must show that you have:

Worked with the creditor to create a valid payoff schedule

Show that you have made timely payments for the prior three months.

As for collections and charge-off accounts, these don’t necessarily need to be paid off or placed on a payment plan. You will, however, need to provide an explanation letter for each collection or charge-off.