FHA Loans With 500 FICO Credit Scores Mortgage Guidelines

Gustan Cho Associates

This BLOG On FHA Loans With 500 FICO Credit Scores Mortgage Guidelines Was UPDATED And PUBLISHED On October 13th, 2020

FHA Loans With 500 FICO
Gustan Cho Associates

Home buyers can qualify for FHA Loans With 500 FICO Credit Scores. Not too many lenders will offer FHA Loans With 500 FICO. HUD, the parent of FHA, allows borrowers with under 580 credit scores to qualify. To qualify for FHA Loans With 500 FICO, borrowers need to put 10% down payment. 

  • Let’s be honest, not everybody has perfect credit
  • Life happens, and certain events will impact your credit scores such as loss of job, divorce, or medical emergency
  • We all know it is very easy to wreck your credit score and next to impossible to get your scores back to where they were
  • Damage is done instantly, and re-establishing credit takes time
  • You may feel trapped into paying rent and making your landlord rich because of your credit score
  • That is where we save the day!
  • Gustan Cho Associates at Loan Cabin do not have any mortgage overlays
  • We are experts in originating and funding FHA Loans With 500 FICO Credit Scores
  • We are able to help clients obtain an FHA loan with credit scores all the way down to 500

In his blog, we will detail the qualifications for FHA mortgages with credit score between 500 and 579.

FHA Loans With 500 FICO Down Payment Mortgage Guidelines

The first thing you need to consider if your credit score is between 500 and 579 you are required to put down a minimum of 10% for an FHA mortgage.

  • If your credit score is 580 or above, you are only required to put down 3.5%
  • We help many clients who are close to 580 get their credit scores above that plateau but this is not possible in every situation
  • Every day we get phone calls asking if we offer the 10% down FHA mortgage for credit scores below 580 and the answer is, YES you bet

In fact, we do many of them all the time! We are experts in this mortgage program.

HUD Agency Guidelines Versus Lender Overlays

HUD Agency Guidelines Versus Lender Overlays
Gustan Cho Associates

Since we do not have any lender overlays at Gustan Cho Associates, we can offer FHA loans exactly as HUD guidelines allow.

  • NOTHING EXTRA. For a complete review of HUD requirements please see the HUD 4001.1 HANDBOOK
  • I recommend you give us a call directly versus reading this handbook
  • The handbook is full of hard to interpret mortgage lingo and not to mention over 1000 pages of guidelines

Please reach out to her directly to Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or send your question to gcho@gustancho.com.

Approve/Eligible Versus Manual Underwriting On FHA Loans With 500 FICO

One myth about sub 580 credit score FHA mortgages is that they require a manual underwrite.

  • That is simply not the case. Gustan Cho Associates have closed many approve/ eligible FHA Loans With 500 FICO
  • The AUS system will simply factor in payment history, reserves, and credit score, the determine if we need to manually underwrite the loan

See our AUS BLOG for more details.

Direct Lender With No Overlays On FHA Loans With 500 FICO

Direct Lender With No Overlays On FHA Loans With 500 FICO
Gustan Cho Associates

If you receive an approve/ eligible AUS report, Gustan Cho Associates will underwrite directly to those results.

  • Meaning the AUS will determine if your debt to income ratio and reserves are adequate
  • They will let us know what documentation will be needed to close

If you are required to downgrade to a manual underwrite we are experts in getting these closed. DO NOT panic, we do these all the time!

Differences Between AUS Approval Versus Manual Underwriting

The main difference if we need to manually underwrite the loan is proof of on-time rental or housing payments.

  • This can be accomplished with verification of rent if you’re paying a management company or 12 canceled checks showing payment to your landlord
  • There is a more strict debt to income requirements when manually underwriting an FHA mortgage with credit scores below 580

See below:

DTI for credit scores of 500-579 may not exceed 31% / 43% –

  • meaning your housing payment may not be higher than 31% of your gross monthly income (including all taxes, insurances, and any homeowner’s association dues)
  • your total monthly debts must be below 43% of your gross monthly income

Mortgage Rates With FHA Loans With 500 FICO Credit Scores

Mortgage Rates With FHA Loans With 500 FICO Credit Scores
Gustan Cho Associates

Many times, our borrowers are concerned about interest rate when combined with lower credit scores.

  • The good news with an FHA mortgage is you have the ability to complete an FHA streamline after you have made 6 payments on your current FHA loan
  • Please see our FHA STREAMLINE BLOG for details on that program
  • Once the mortgage is reporting on your credit report with at least six payments, you should see your credit scores skyrocket
  • At this time if rates are lower you made do an FHA streamline. having a mortgage with on-time payments reported to the credit bureaus is the best way to positively impact your credit profile

In the eyes of the credit bureaus, mortgage debt is considered good debt. It weighs in highly with their algorithms.

Starting FHA Loans With 500 FICO Mortgage Process With Gustan Cho Associates

How to start the mortgage process below 580:

Gather the following documentation:

  • Last 60 Days Bank Statements – to source 10% down payment
  • Last 30 Days Pay Stubs
  • Last Two Years W2’S
  • Last Two Years Tax Returns
  • Driver’s License or Government-Issued Photo ID

From there contact Gustan Cho Associates directly at 262-716-8151 or text us for faster response. One of our experienced loan officers will answer any questions you have. We will assign you to a licensed loan officer in your state! We are available to answer your question 7 days a week, mornings or evenings. We pride ourselves on being up-to-date with all mortgage guidelines. We are a full-service mortgage company licensed in multiple states without any lender overlays to get in the way. We look forward to helping you and your family. Please read our reviews! They speak for themselves!

1 Comment
  1. james says

    I have a credit card debt of 9k and some medical debts on credit report , this made my credit score drop to 505, I couldn’t get a loan because I had a low credit score and I had 7 negative items on my credit report as well, i almost sold off some of my properties to pay the debt , so I contacted a friend before doing so and she recommended this experts which I contacted and worked with for 4 days, he raised my credit score to 790 and I was able to get approved for a home loan ,it is easy to fall prey to incompetent experts who are not able to complete the work given to them,I will recommend this great credit expert for any credit related issue. You can reach him at this mail at alex@loancabin.com and you will be overwhelmed with the results as well. Alex Carlucci and Jammi Cash of Gustan Cho Associates have really helped me. Piotr Bieda and Martyna Szettel were great in sending us the instructions and taking charge with the credit bureaus. Massimo Ressa and Gianna Dilla processed my loan. Kathleen Steffek was my mortgage underwriter.

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