Mortgage Approval With 580 FICO Credit Score With FHA Loans

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Mortgage Approval With 580 FICO Credit Score With FHA Loans

This BLOG On Mortgage Approval With 580 FICO Credit Score With FHA Loans Was UPDATED And PUBLISHED On October 17th, 2019

Mortgage Approval With 580 FICO Credit Score
Gustan Cho Associates Mortgage News

The Federal Housing Administration, a subsidiary of the United States Department of Housing and Urban Development ( HUD ) insures residential mortgage loans to FHA approved mortgage lenders against default from FHA mortgage loan borrowers.

  • FHA is not a mortgage lender
  • FHA is a government entity that insures mortgage loans against default
  • In order for the borrower to get an FHA loan the mortgage lender needs to follow FHA Guidelines in order for the home loan to be insurable
  • FHA is the most popular mortgage loan program in the United States
  • FHA loans enable home buyers who have less than perfect credit and higher debt to income ratios the opportunity to become homeowners and realize the dream of homeownership
  • FHA Loans have much lenient mortgage lending guidelines than conventional loans 
  • Homebuyers can qualify for a 3.5% down payment FHA Loans with credit scores as low as 580
  • Over 35% of our borrowers get FHA Mortgage Approval With 580 FICO Credit Score
  • Need a credit score of 620 to qualify for a conventional loan

In this article, we will cover and discuss mortgage approval with 580 FICO credit score on FHA Loans.

What If Told Need 620 To Qualify For FHA Loan?

What If Told Need 620 To Qualify For FHA Loan?

Over half of my mortgage loan borrowers are folks who did not qualify with other mortgage lenders. Many of our borrowers get FHA Mortgage Approval With 580 FICO Credit Score:

  • Many borrowers are told that they were told by their local bank, credit unions, or other mortgage companies that they did not qualify for an FHA loan because their credit scores were under 640
  • Many lenders have something called mortgage lender overlays
  • Overlays are mortgage lending guidelines that are imposed by their own institution
  • Overlays are guidelines that are above and beyond the minimum FHA lending guidelines set by HUD
  • Minimum FHA guidelines on credit are 580 to qualify for an FHA Loans
  • However, a mortgage lender can not accept the 580 credit score and set their own lending overlays
  • A lender can decide to set their minimum credit score requirements at 620 or 640
  • However, Gustan Cho Associates Mortgage Group has no lender overlays
  • If borrowers meet the minimum HUD lending guidelines and get an approve/eligible per DU FINDINGS or LP FINDINGS, they will get a mortgage loan approved
  • Borrowers will close as long as they meet all conditions stated on the automated underwriting system

Borrowers who are told they do not qualify for an FHA loan, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

Negatives With Having Credit Scores Under 620

Borrowers with under 620 credit scores but have at least a 580 credit score can get mortgage approval with us:

What are Negatives With Having Credit Scores Under 620
  • However, debt to income ratio cap will be limited and lower than borrowers with credit scores of 620 or higher
  • If credit scores are at 620 or higher, maximum front end debt to income ratio is capped at 46.9% and back end debt to income ratio is capped at 56.9% DTI
  • If credit scores are under 620 with no compensating factors, debt to income ratios will be capped at 43% DTI
  • With one compensating factor, debt to income ratio can possibly go as high as 47% DTI
  • With at least two compensating factors, borrowers may go up to 50% debt to income ratios

What Are Compensating Factors?

What Are Compensating Factors?

Compensating factors are positive factors that the mortgage loan applicant has.

Examples of compensating factors are the following:

  • reserves ( principal, interest, taxes, insurance )
  • verification of rent ( VOR ) with less than 5% payment shock
  • larger down payment, residual income
  • income that is not being used to qualify for the mortgage loan.

Manual Underwriting On Mortgage Approval With 580 FICO Credit Score

What is Manual Underwriting On Mortgage Approval With 580 FICO Credit Score

If credit scores are under 620 and debt to income ratios are higher than 43% DTI, borrowers can still get an automated underwriting system approval if AUS recognizes multiple compensating factors. If the borrower still renders a render a refer/eligible, then it can be downgraded to manual underwriting.

Automated Underwriting System

What is this Automated Underwriting System

If Automated Underwriting System will not approve borrowers via automated approval and yields a refer/eligible per AUS, it can be manually underwritten as long as borrowers have 12 months of timely payments and verification of rent.  Not all mortgage lenders do manual underwriting but I do.  Borrowers with credit scores under 620 but at least 580 and need to qualify for a mortgage,  please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us at 262-716-8151 for faster response. Or email us at gcho@loancabin.com. Borrowers can qualify for FHA Mortgage Approval With 580 FICO Credit Score.

Related> Under 620 FICO mortgage approvals

Related> Can I get mortgage approval with credit scores under 620?

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