Can You Qualify For FHA Loan With 580 Credit Scores?

There are minimum credit score FHA Loan Requirements.  You can qualify for a 3.5% down payment FHA Loan with 580 Credit Scores.  However, most mortgage lenders have mortgage lender overlays where even though FHA only requires a 580 FICO credit score to qualify for a 3.5% down payment FHA Loan, the individual mortgage lender may require the borrower to have a 640 FICO credit score.  This higher requirements on credit scores by mortgage lenders is called mortgage lender overlays on credit scores.  If you are told that you do not qualify for a FHA Loan due to having credit scores under 640 FICO credit scores by a FHA mortgage lender, it is because the mortgage lender has mortgage lender overlays. You may not qualify for a FHA Loan with that particular mortgage lender but that does not mean you do not qualify for a FHA Loan with a mortgage lender such as myself where we have no mortgage lender overlays.  We only require minimum FHA lending guidelines on credit scores and debt to income ratios.

FHA Loan With 580 Credit Scores Versus 620 Credit Scores

There are restrictions in qualifying for a FHA Loan with 580 credit scores versus 620 credit scores. First, the maximum debt to income ratios allowed for mortgage loan borrowers with credit scores under 620 FICO credit scores is 43% debt to income ratios.  Mortgage loan borrowers with credit scores higher that 620 FICO credit scores, the back end debt to income ratios can go up as high as 56.9%.  The maximum front end debt to income ratios is capped at 46.9%.  The maximum front end debt to income ratios for mortgage loan borrowers with credit scores under 620 FICO credit scores is capped at 31% DTI.

Requirements For FHA Loan With 580 Credit Scores

The lower your credit scores, the higher your risk.  This is how mortgage lenders view with mortgage loan borrowers with under 620 FICO credit scores.  Just having a minimum of a 580 credit score will not guarantee a FHA loan approval.  Mortgage loan underwriters will review the mortgage loan borrowers overall payment history from their credit report.  Why is the home loan borrower’s credit score under 580 FICO?  Is it due to having maxed out credit cards?  Is it because of recent late payments? Is it due to multiple collection accounts that is not paid?  Is it due to recent bankruptcy and/or foreclosure?  All of these factors will be taken into consideration.  Medical collections and charge offs do not count and do not have to be paid to qualify for a FHA Loan.  Non-medical collections do not have to be paid, however, if you have a total aggregate balance of unpaid non-medical collections that is greater than $2,000, then 5% of the unpaid balance will be taken into calculating your debt to income ratios.

Verification Of Rent

Verification of rent is one of the most important compensating factor that a mortgage loan borrower can provide.  Verification of rent can be provided by providing 12 months of canceled checks or 12 months of bank statements showing the funds leaving the renter’s account and being transferred to the landlord’s account if they are renting from a private landlord.  If the renter is renting from a property management company, then a letter from the property manager of the property management company stating that they have been making timely rental payments for the past twelve months is sufficient.  Verification of rent may be required from mortgage loan borrowers with credit scores of under 600 FICO if the automated underwriting systems request it as a condition.

Get Approved For FHA Loan With 580 Credit Scores

If you were told by a lender because you have credit scores under 600 FICO, contact me at 262-716-8151.  A large percentage of the mortgage loans I close are borrowers with credit scores under 620 FICO.  Please do not hesitate to contact me if you have any questions or email me at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

2 Comments

  1. April Hardway says:

    I am trying to purchase a home that I have rented for the last three years. My credit is not the best, but I have paid my rent on time never late the whole time. Also the house is in a great neighborhood and worth double of the loan amount I need please help I will not let you down

    • Gustan Cho says:

      As long as you have documented income and low credit scores you can qualify for a loan. Minimum credit scores required for a 3.5% down payment home purchase FHA Loan is 580 FICO. Please give us a call at 800-900-8569 so we can help you.