Buying a Home In Tennessee With Bad Credit and Low FICO

Gustan Cho Associates are mortgage brokers licensed in 48 states

HUD, the parent of FHA, allows homebuyers to buy a home in Tennessee with bad credit and credit scores down to 500 FICO. The best loan programs recommended for home buyers buying a home in Tennessee with bad credit and low credit scores are government and/or conventional loans. This is because FHA, VA, USDA, and conventional loans offer the lowest down payment requirement at the best mortgage rates on primary owner-occupant mortgages. In the following paragraphs, we will cover buying a home in Tennessee with bad credit and 500 FICO.

FHA Loans With Bad Credit In Tennessee

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FHA loans are the most popular home loan program in Tennessee for first-time homebuyers and buyers with less than perfect credit. Homebuyers have other mortgage options for bad credit if they do not qualify for government and/or conventional loans.

Non-QM loans are alternative specialty mortgage loans for bad credit borrowers or homebuyers who cannot qualify for traditional government and conforming loans.

Tennessee Mortgage Lenders With No Overlays

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Gustan Cho Associates are mortgage brokers licensed in 48 states including licensed in Tennessee. We have over 190 wholesale mortgage lenders and dozens of wholesale non-QM mortgage lenders.

The team at Gustan Cho Associates have the ability to broker non-QM loans such as no-doc mortgages, bank statement loans, non-QM loans one day out of bankruptcy and/or foreclosure, asset-depletion mortgages, 90% LTV jumbo loans, non-QM jumbo mortgages with credit scores down to 500 FICO. Gustan Cho Associates has dozens of non-QM and specialty mortgage loan programs not offered at other mortgage banking companies.

Non-QM Loans and Specialty Mortgages In Tennessee

There are many home loan programs other than government and conventional loans when buying a home in Tennessee with bad credit and under 620 FICO credit scores. There are many instances when Tennessee homebuyers cannot qualify for government and/or conventional loans when qualifying for a mortgage.

For example, a business owner or self-employed wage earner may have great credit and high credit scores but may substantial unreimbursed business expenses on their income tax returns where they may not have enough adjusted gross income on their tax returns to meet the minimum qualified income. Gustan Cho Associates has dozens of non-QM and alternative specialty mortgage loan programs.

Tennessee Jumbo Loan Requirements

The maximum conforming loan limit for 2022 is capped at $647,680 on conventional loans. HUD increased the 2022 FHA loan limits to $420,680. Any mortgage loan higher than the 2022 conforming loan limit of $647,580 is called non-conforming loans or jumbo loans. Gustan Cho Associates has specialty traditional jumbo loans in Tennessee that are unique and different from any other Tennessee Jumbo mortgage lenders offers.

Gustan Cho Associates offers Tennessee jumbo loans with a 10% down payment. Tennessee jumbo loan borrowers need a minimum of a 660 credit score to qualify for the 90% LTV jumbo loan in Tennessee. The maximum debt to income ratio of up to 50% DTI. The 90% LTV jumbo loan in Tennessee is a full-doc traditional jumbo mortgage loan with competitive rates. The Tennessee 90% LTV jumbo mortgage loan program does not require private mortgage insurance

Tennessee Jumbo Loans For Borrowers With Bad Credit

Tennessee homebuyers of higher-end homes needing a jumbo loan can be eligible for non-QM jumbo mortgages with credit scores down to 500 FICO. Tennessee jumbo lenders consider jumbo mortgages riskier than traditional government and/or conventional loans. Therefore, with risk comes caution for Tennessee jumbo lenders. Lenders take the borrower’s ability to repay. Mortgage companies always look at the worst-case scenario.

Tennessee Non-QM Jumbo Loans With Low Credit Scores

Higher-end homes take much longer to sell in the event the home is foreclosed. It may take many months or even years to sell a higher-end home. Therefore, Tennessee jumbo lenders will want to make sure the borrowers ability to repay the jumbo loan. The borrower’s assets, cash down payment, reserves, and financials are taken into consideration and given more weight than the borrower’s credit scores and/or prior bad credit history.

Tennessee jumbo lenders understand people can go through periods of bad credit, bankruptcy, foreclosure, and other extenuating circumstances due to loss of employment, loss of business, death, extended illness, divorce, but some people recover sooner than others after periods of bad credit. Gustan Cho Associates has several specialty and alternative mortgage loan programs on jumbo loans in Tennessee.

How Can I Buy a House With Bad Credit and No Down Payment?

You do have a few options if you are looking to purchase a house with bad credit and no down payment. Some of these options include special mortgage programs while others may require you to source the down payment.

VA Loan – If you are a veteran or active military living in Tennessee, you can purchase a home with no down payment and bad credit using a VA loan. Many lenders have credit score minimums but at Gustan Cho, we can help you with scores down to 500.

USDA Loan – USDA loans have no down payment and also have no credit score minimums. Keep in mind that lenders can and do impose their own credit score minimums. To qualify for this loan, the home must be in a rural area and there are income limits as well.

Down Payment Assistance – If you have very low credit scores, you may be able to qualify for down payment assistance and then apply for an FHA loan. With FHA, the down payment will be 10% when credit scores are below 580. Therefore, you just need to find a way to figure out the down payment, but the mortgage can absolutely be done with low scores.

Types Of Non-QM Mortgages In Tennessee

Besides government and conventional loans, homebuyers can explore other non-QM and/or specialty alternative mortgage loan programs such as no-doc mortgages for primary homes, non-QM loans one day out of bankruptcy, and foreclosure, 12-month bank statement loans, asset-depletion mortgages, P and L stated income loans, traditional 90% LTV jumbo mortgages, no-QM mortgages with credit scores down to 500 FICO, and dozens of other alternative financing mortgage loan programs.

Tennessee FHA Loan Requirements

FHA loans are the most popular loan program in Tennessee for first-time homebuyers, borrowers with no credit scores, and borrowers with credit scores down to 500 FICO. HUD, the parent of FHA has created and implemented lenient mortgage guidelines on FHA loans so every hard-working American has a chance to realize the dream of homeownership becoming a reality.

HUD has helped millions of homebuyers in Tennessee make the dream of owning a home become a reality with a low down payment and less than perfect credit. Homebuyers need at least a 580 credit score to qualify for an FHA loan to buy a house with a 3,5% down payment home purchase loan.

FHA Loans In Tennessee With Credit Scores Down To 500 FICO

Homebuyers with under 580 credit scores and down to 500 FICO need a 10% down payment to qualify for an FHA loan. You need an approve/eligible per automated underwriting system or the file needs to be a manual underwrite. If the borrower gets downgraded to a manual underwrite, they need to meet HUD manual underwriting guidelines.

Tennessee FHA Loan Approval With Automated Underwriting System

The key to getting an approve//eligible per automated underwriting system approval, the borrower needs to be timely on all monthly payments report to the three credit bureaus for the past 12 months. FHA loans are the best home mortgage loan program in Tennessee for first-time homebuyers, those with high debt to income ratio, borrowers with credit scores down to 500 FICO, homebuyers who recently graduated from college with no credit scores, borrowers with bad credit, homebuyers with outstanding collections, those with charged-off accounts, and borrowers with less than perfect credit.

Tennessee FHA Loan Requirements on Manual Underwriting

FHA and VA loans are the only two mortgage loan programs that allow manual underwriting. There is no major difference between manual and automated approval underwriting with the exception when it comes to debt to income ratio. Manual underwriting requires a maximum of 31% front-end and 43% back-end with no compensating factors, 37% front-end and 47% back-end debt to income ratio, and 40% front-end and 50% back-end debt to income ratio with two compensating factors.

Mortgage Underwriter Discretion on Manual Underwriting

Mortgage underwriters have underwriter discretion and can exceed the above debt to income ratio on a case per case scenario if they believe the borrower has strong compensating factors. HUD manual underwriting guidelines require 24 months of timely payments to meet the manual underwriting requirements and guidelines on FHA loans. Verification of rent is generally required on manual underwriting. Gustan Cho Associates can waive rental verification if the borrower is living rent free with family. We will provide a living with family rent free form for the landlord to complete, sign, and date.

Types Of FHA Lenders In Tennessee

It is important Tennessee homebuyers understand the difference between agency mortgage guidelines and lender overlays on government and conventional loans. Gustan Cho Associates is one of the very few lenders in Tennessee with no lender overlays. Many Tennessee FHA lenders have lender overlays.

What Are Lender Overlays versus HUD Guidelines?

What lender overlays are higher lending requirements and guidelines that surpass the minimum agency mortgage requirements of HUD. HUD, the parent of FHA is the federal government agency that creates and implements the lending requirements on FHA loans. However, individual mortgage lenders can have their own higher lending requirements on credit scores, collection accounts, manual underwriting, debt-to-income ratios, and other credit requirements.

Tennessee VA Loans Requirements

VA loan programs are the best loan program in the nation. However, only eligible active and retired members of the United States Military and surviving spouses of eligible veterans with a VA certificate of eligibility (COE) can qualify for VA loans. Lenders offer 100% financing with no down payment required, no annual mortgage insurance premium, no maximum loan limit, at competitive mortgage rates due to the government guarantee.

Tennessee VA Loans With No Overlays

VA loans do not have a minimum credit score requirement or maximum debt to income ratio caps as long as the borrower can get approve/eligible per automated underwriting system. Residual income and timely payments in the past 12 months are key to getting an approve/eligible per automated underwriting system. Gustan Cho Associates has zero lender overlays on VA loans in Tennessee.

Buying A Home In Tennessee With Bad Credit During Bullish Tennessee Housing Market 

Tennessee is booming. The state has no state income taxes and a low cost of living. Many residents in high-taxed states are moving to Tennessee. For example, DuPage County, Illinois home prices have dropped 24% while property taxes have gone up 7%. Many Chicago area residents are fleeing Illinois to lower-taxed states like Tennessee. After the election of JB Pritzker, many Illinois homeowners who called Illinois home are moving to lower-taxed states like Tennessee. One of the many benefits for residents in Tennessee is no state income taxes, affordable housing, great weather, countless annual festivals, and getting a lot of home for your money. One of the top concerns homebuyers have is Buying A Home In Tennessee With Bad Credit And Low Credit Scores.

Tips In Buying a Home In Tennessee With Bad Credit

Not everyone has 800 FICO, perfect credit, low debt to income ratios, and 20% down payment to purchase a home. Buying A Home In Tennessee With Bad Credit And Low Credit Scores is possible. Many may dream of moving to Nashville or other areas of Tennessee but are concerned about Buying A Home In Tennessee With Bad Credit And Low Credit Scores.

What Is The Lowest Credit To Get Mortgage Approval In Tennessee

HUD, the parent of FHA, is in charge of the administration of FHA loans. Borrowers with credit scores down to 500 FICO are eligible for FHA loans with a 10% down payment. To qualify for an FHA loan with a 3.5% down payment, you need a 580 credit score.

Gustan Cho Associates specializes and helps homebuyers relocate and Buying A Home In Tennessee With Bad Credit And Low Credit Scores. More and more companies are offering remote-wage earner positions where homebuyers can now purchase homes in any state. There are more opportunities for homebuyers to purchase a home out of state now than ever before. More and more employers are offering remote job positions and online jobs.

Not All Lenders Have The Same Mortgage Requirements

Not all lenders have the same mortgage requirements on government and conventional loans. All lenders need to have their borrowers meet the minimum agency lending guidelines on government and conventional loans. However, lenders can have their own lending requirements that are above and beyond those of FHA, VA, USDA, Fannie Mae, and Freddie Mac. There are countless Non-QM Lenders. Not all Non-QM Loans have the same mortgage guidelines. For example, a borrower who needs to qualify for a 3.5% FHA loan may have a 580 FICO with outstanding collections.

Choosing FHA Bad Credit Lenders In Tennessee 

A lender may disqualify this borrower for an FHA loan unless they have a 620 FICO and have all of his outstanding collections paid off. The borrower meets the agency HUD Guidelines but may not qualify with this lender due to their lender overlays. Gustan Cho Associates is a mortgage company licensed in multiple states with lender no overlays on government and conforming loans. We have zero overlays on FHA, VA, USDA, Conventional loans. We just go off the AUS Findings. The above borrower may not qualify with the above lender but will definitely qualify at Gustan Cho Associates.

Buying a Home In Tennessee With Under 580 Credit Scores

HUD, the parent of FHA, allows credit scores under 580 down to 500 FICO. However, borrowers with under 580 credit scores require 10% down payment. To get qualify for 3.5% down payment FHA Loans, the borrower needs a 580 FICO or higher. This is what Michelle McCue, the top producer at Gustan Cho Associates advises:

Michelle McCue, a Senior Vice President at Gustan Cho Associates helps more borrowers with under 580 FICO than any other loan officer at Gustan Cho Associates. Alex is also a contributing associate editor at Gustan Cho Associates Mortgage News.

Mortgage Loan Options For First-Time Homebuyers in Tennessee

FHA loans are the best loan program for borrowers with prior bad credit, outstanding collections, charged-off accounts, and lower credit scores. FHA Loans are government loans backed by the U.S. Department of Housing and Urban Development (HUD). HUD is the parent of FHA. The reason why FHA loans are more lenient than conventional loans issued by Fannie Mae and Freddie Mac is due to the government guarantee. Due to the government guarantee, lenders can originate and fund FHA loans with a 3.5% down payment, bad credit, low credit scores, high DTI, competitive rates, and a short waiting period requirement after a housing event and/or bankruptcy.

Start The Home Buying and Mortgage Process In Tennessee

For more information about the contents of this article, please contact us at Gustan Cho Associates at 800-900-8569 or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates has a national reputation for its no-lender overlays business model.

We have a reputation for being able to do loans other lenders cannot do. A large percentage of our borrowers are folks we closed on FHA and VA loans with credit scores down to 500 FICO and manual underwrites. We have a national reputation for being able to do loans other mortgage companies cannot do.


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One Comment

  1. I am looking at trying to purchase a home with VA loan.. Unfortunately my credit score is around 550.

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