Can I Qualify For FHA Loan With Under 620 Credit?
This Article On Can I Qualify For FHA Loan With Under 620 Credit Was Written By Gustan Cho NMLS 873293
There is a huge market for FHA Borrowers with under 620 FICO Credit Scores. I get so many phone calls daily where the first question the borrowers ask me is ” Can I Qualify For FHA Loan With Under 620 Credit?” The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 are experts in originating and funding FHA Loan With Under 620 Credit Scores. Here is what The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 has to offer for borrowers who need to Qualify for FHA Loan With Under 620 Credit Scores:
- FHA requires only a 580 FICO credit score for a borrower to qualify for a 3.5% down payment FHA Loan.
- However, most FHA mortgage lenders do have higher credit score requirements.
- For example, most banks require a 640 credit score while most mortgage companies will require a minimum of 620 FICO.
- A substantial percentage of my borrowers have under 620 FICO
- CrossCountry Mortgage Inc. NMLS 3029, is a five star national mortgage banking company headquartered in Brecksville, Ohio and licensed in over 50 states
- CrossCountry Mortgage, under the leadership of mortgage icon President and CEO Ronald J. Leonhardt Jr. is hands down the fastest growing mortgage company in the country and most of the loans close in 21 days or less
- CrossCountry Mortgage has no overlays on government and Conventional Loans and will only go off DU/LP FINDINGS
- Lender overlays are when a bank or lender has additional requirements than those set by HUD, VA, USDA, GINNIE MAE, FANNIE MAE, FREDDIE MAC
- Here is a link about getting FHA LOANS under 620 FICO that may be helpful for those of you home buyers who were told that they do not qualify due to having under 620 FICO credit scores: FHA MORTGAGE APPROVAL WITH UNDER 620 CREDIT SCORES .
FHA Minimum Credit Score Requirements To Qualify For Mortgage
When borrowers asks their local loan officer at their local bank ” Can I Qualify For FHA Loan With Under 620 Credit”, the banker’s response will probably say NO. Most of them do not reply that you do not qualify with their bank but you may qualify with another lender that has no lender overlays on credit score. Most lenders do not explain to the borrower who visit or contact them that FHA minimum credit score requirements is 580 FICO. It is a shame that there are folks out there who meet the minimum FHA Guidelines on credit scores but are told that do not qualify by lender after lender and these lenders do not tell them that they do not qualify with them but may qualify somewhere else. 75% of my borrowers are borrowers who were told that they do not qualify or were denied for a loan at the last minute due the lender overlays by their lender.
Qualifying For FHA Loan With Under 620 Credit Scores
Having credit scores under 620 FICO does have disadvantages for the borrower and if at all possible.
- I try to help all of my borrower get their credit scores up if there are quick fixes like paying down their credit cards
- Adding borrowers to a family member and/or close friend as an authorized user are ways of boosting credit scores
- Getting secured credit cards is the fastest and easiest way of re-establishing and boosting your credit scores
- I can touch on the above tips shortly but if a borrower has under 620 FICO credit scores, the maximum debt to income ratio allowed per HUD is 43% DTI to get an approve/eligible per automated findings
- If your credit scores are 620 FICO or higher, then the maximum back end debt to income ratios allowed to get an automated approval per Automated Underwriting System is a back end debt to income ratio of 56,9% DTI and the front end DTI is capped at 46.9% DTI to get an automated approval per AUS.
- Borrowers with higher debt to income ratios may need to try to get their credit scores to at least 620 FICO and again, there are some quick fixes that your loan officer can help you with to boost your credit scores
- Disputing medical collections is one quick fix I use which I can explain in later blogs
Meeting AUS Conditions With Under 620 Credit
Another major issue with having credit scores under 620 FICO. Here are some conditions the Automated Underwriting System may condition:
- The AUS may or may not conditon VOR.
- Automated Underwriting System may ask for Verification Of Rent which is proof that the borrower has paid their monthly rent payments with either a bank check and/or wire the funds from their bank account to their landlord
- If paid with a check, then the lender will require 12 months canceled checks and the renter cannot have been late with their rental payment in the past 12 months
- If the renter has paid their rental payment via bank wire to their landlord, then 12 months bank statements will need to be provided where it shows the monthly rental payment being wired out of their account into the landlord’s bank account
- If the renter has paid their rental payment with cash and gotten a cash payment receipt payment by their landlord, that does not count and is not considered proof of rental verification
- Borrowers who have credit scores under 620 FICO and the automated approval conditions for rental verification and they cannot provide it cannot qualify for a FHA Loan because they need to meet all of the conditions of the Automated Underwriting System
- This ends up hurting home buyers who are living with family trying to save their down payment money for a home purchase
- When this happens, your loan officer should be able to guide you in boosting your credit scores to at least 620 FICO where the AUS will not require verification of rent
Loan Process With Under 620 FICO
The answer is YES to the question of Can I Qualify For FHA Loan With Under 620 Credit:
- As mentioned, a large percentage of my borrowers have credit scores under 620 FICO, however, there are negatives with having lower credit scores
- Besides having a lower debt to income ratio cap of 43% DTI versus 56.9% DTI cap on borrowers with at least a 620 FICO credit score, and the potential of the Automated Underwriting System requiring verification of rent, the AUS can also require one month’s of PITI ( PRINCIPAL, INTEREST, TAXES, INSURANCE ) in reserves
- Reserves cannot be gifted. FHA does allow 100% gift funds from family members to gift borrowers for their home purchase, however, gift funds are not viewed favorably and there are many times where if borrowers have credit scores under 580 FICO, the Automated Underwriting System may not allow gift funds
- Borrowers with under 620 FICO credit scores will get higher mortgage interest rates on a FHA Loan even though FHA Loans is insured by HUD, the U.S. Department of Housing and Urban Development
Tips In Improving Your Credit Scores To Qualify For FHA Loan
There are ways of boosting your credit scores in a very short period of time:
- If you have maxed out credit cards, you need to pay them down as much as you can, preferably below the 20% of your credit limit
- However, do not pay it down to a zero balance
- Leave $10 dollar or so in there to maximize your credit scores
- Leaving a few dollars on a credit card will maximize your credit scores than having a zero balance
- There are many consumers who always pay their bills on time but still have a low credit score
- The reason for this is because they do not have any credit tradelines which are having credit cards or other debt obligations where they have had a on time payment history for at least 12 months
- Those who have low credit scores due to not having any credit reporting on their credit report can instantly boost their credit scores by adding themselves on as an authorized user on a family member and/or friend’s credit card
- However, make sure that the person you are adding yourself on as authorized user has perfect payment history and a very low credit card balance, otherwise it will hurt you more than help you
Re-Establishing And Boosting Credit Scores With Secured Credit Cards
Consumers with poor credit or who recently gone through bankruptcy and/or foreclosure can get secured credit cards to re-establish their credit.
- Secured credit cards are the easiest and fastest way of not just re-establishing your credit, but also to boosting up your credit scores
- Make sure that you get at least a $500 credit limit secured credit card
- Preferably a $1,000 limit credit card for faster optimization
- The higher the credit limit, the better it is for you
- For maximum optimization, try to get three secured credit cards
- If you have low credit scores, you can potentially increase your credit scores by 20 to 60 plus FICO points by getting secured credit cards
- I have seen borrowers’ credit scores boost over 30 FICO points with just one secured credit card
If you are told that you do not qualify for a FHA Loan by a lender or multiple lender for not having a 620 or 640 FICO credit score, you can rest assured that the lender telling you is not correct. You may not qualify with that particular lender but you do qualify with a FHA mortgage lender like myself that has no lender overlays. There are plenty of mortgage lenders like myself so all you need to do is Google FHA LENDERS WITH NO OVERLAYS and you will see lists after lists of lenders with no lender overlays.
2017 FHA Guidelines In Qualifying For FHA Loan With No Overlays
The Gustan Cho Team at CrossCountry Mortgage has no overlays on FHA Loans. Here are borrowers who can qualify with us at The Gustan Cho Team at CrossCountry Mortgage:
- Closings in 21 days or less
- You do not have to pay outstanding collections or charge offs to qualify for a FHA Loan
- 580 FICO score to qualify for a FHA Loan with 3.5% down payment
- non-occupant co-borrowers allowed and no limit as of how many non-occupant co-borrowers you can have
- Borrowers in a Chapter 13 Bankruptcy Repayment Plan can qualify one year into the Chapter 13 Bankruptcy with approval of Chapter 13 Bankruptcy Trustee
- No waiting period after Chapter 13 Bankruptcy discharged date
- The Gustan Cho Team at CrossCountry Mortgage will work with borrowers with under 580 FICO Credit Scores to boost their credit scores and get them qualified
- CrossCountry Mortgage NMLS 3029 is licensed in 50 states
- The Gustan Cho Team Rapid Response Group at CrossCountry Mortgage is available 7 days, evenings, weekends, and holidays
Contact us at 262-878-1965 or text Gustan Cho NMLS 873293 on his cell at 262-716-8151 for faster response or email us at firstname.lastname@example.org.
Gustan Cho NMLS 873293
The Gustan Cho Team at CrossCountry Mortgage
CrossCountry Mortgage Inc. NMLS 3029