This BLOG On FHA Loans With 500 Credit Scores Mortgage Guidelines Was UPDATED And PUBLISHED On November 17th, 2020
FHA Loans are one of the most popular loan programs in the U.S.
- FHA Loans are common mortgages for first time home buyers, buyers with bad credit, higher debt to income ratio borrowers, and borrowers after bankruptcy or foreclosure
- HUD, the parent of FHA, is not a lender
- HUD created FHA to insure home loans to private lenders
- Lenders get government guarantee in the event borrowers default on their FHA Loans
- Due to this government guarantee, lenders are able to offer home loans to buyers with lower credit scores, bad credit, and high DTI with 3.5% down payment
Borrowers can qualify for FHA Loans With 500 Credit Scores at Gustan Cho Associates.
What Are Minimum Credit Score Requirements On FHA Loans
Minimum credit scores for FHA Loans with 3.5% down payment is 580 FICO.
- Borrowers can qualify for FHA Loans With 500 Credit Scores
- Under HUD 4000.1 FHA Handbook, borrowers can qualify for FHA Loans under 580 FICO
- To qualify for FHA Loans With 500 Credit Scores and up to 579 FICO, HUD requires home buyers to put 10% down payment versus 3.5%
To qualify for FHA Loans With 500 Credit Scores, borrowers need to get an approve/eligible per automated underwriting system.
How To Get Approve/Eligible Per AUS On FHA Loans With 500 Credit Scores
In order for Automated Underwriting System to render an automated approval on FHA Loans With 500 Credit Scores, borrowers need to meet FHA Scorecard.
To get an approve/eligible per AUS on FHA Loans With 500 Credit Scores, borrowers needs the following:
- Timely payments in the past 12 months on all monthly payments reporting to credit bureaus
- Outstanding collections and charged-off accounts do not have to be paid off
- Two year waiting period after Chapter 7 Bankruptcy discharged date
- Three year waiting period after the recorded date of foreclosure, deed in lieu of foreclosure, short sale
- Meet DTI Guidelines
If borrowers meet all guidelines on FHA Scorecard TOTAL, the borrower will render an approve/eligible on AUS. Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on government and conventional loans. We can qualify and close borrowers with 500 credit scores with automated approval.
Why Do Lenders Have Different Credit Score Requirements On FHA Loans
Over 75% of our borrowers at Gustan Cho Associates are folks who either gotten a last-minute mortgage denial or are stressing over their loan process with a current lender.
- Most lenders have overlays
- What are overlays?
- Lender overlays are additional credit score requirements that are above and beyond those of agency guidelines imposed by HUD
- For example, borrowers can qualify with 500 credit scores with 10% down payment under FHA Guidelines
- However, most lenders will not take on any borrowers without a 620 credit score
- This holds true even though HUD allows borrowers to have credit scores down to 500 FICO
- Most banks require 640 credit scores
- Yet other lenders will require 680 credit scores
- Bottom line is that not all lenders have the same FHA Guidelines
- They all need to meet minimum FHA Guidelines BUT can have higher credit score requirements on top of the minimum required by FHA
Gustan Cho Associates is one of the very few national lenders with no overlays on FHA Loans.
Manual Underwriting Guidelines On FHA Loan
Homebuyers can qualify for FHA Loans during Chapter 13 Bankruptcy Repayment plan.
- However, they need to be in an active Chapter 13 repayment one year with 12 timely monthly payments
- Chapter 13 does not have to be discharged
- There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for FHA Loans
- However, any borrowers in current active Chapter 13 repayment and/or if the discharged date has not been seasoned for two years, they will not get an approve/eligible per automated underwriting system
- The AUS will render a refer/eligible
- Refer/eligible AUS Findings can be done with manual underwriting
- Borrowers can qualify with 580 credit scores with manual underwriting
Again, any borrower with under 580 credit scores down to 500 can qualify with a 10% down payment. To qualify for FHA Loans with a 3.5% down payment, credit scores need to be 580.
Qualify For FHA Loans With Direct Lender With No Overlays
To qualify for FHA Loans With 500 credit scores with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at email@example.com. Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.