Mortgage Approval With 580 FICO Credit Score

Mortgage Approval with 580 FICO Credit Score in 2025: Your Complete Guide

If you’ve been told you can’t get a mortgage because your credit score is 580, you’ve probably heard the wrong advice. The truth? Mortgage approval with 580 FICO credit score is possible — and at Gustan Cho Associates, we make it happen every day.

Many banks and credit unions turn away borrowers with scores under 620 because they have extra rules called lender overlays. We don’t. If you meet HUD’s minimum guidelines, we can get you approved — even if other lenders have already said “no.”

In this guide, you’ll learn:

• How FHA loans work for 580 credit scores.
• Down payment requirements and debt-to-income (DTI) limits.
• How to improve your chances of approval.
• Why lender overlays block many borrowers.
• Alternatives like VA and non-QM loans.

How to get started with Gustan Cho Associates today.

Can You Really Get Mortgage Approval with 580 FICO Credit Score?

Absolutely! You can get an FHA loan by choosing the right lender. This loan program is backed by the U.S. Department of Housing and Urban Development (HUD). It allows people with credit scores as low as 580 to qualify with only 3.5% down.

HUD also allows credit scores down to 500, but if you’re below 580, you’ll need at least a 10% down payment. Many lenders raise the bar and require 620 or even 640 due to their overlays. At Gustan Cho Associates, we have no overlays. You’re good to go if you meet FHA’s published rules and your file gets an approve/eligible through the Automated Underwriting System (AUS).

FHA Loan Requirements for 580 Credit Score Borrowers

If you’re aiming for mortgage approval with 580 FICO credit score through an FHA loan, here’s what you need in 2025:

• Minimum Down Payment: 3.5%
• DTI Limits:
  • If your credit score is under 620, your DTI is capped at 43% without compensating factors.
  • With 1 compensating factor, you may go to 47%.
  • With 2+ compensating factors, you may qualify up to 50% DTI.
• Payment History: 12 months of on-time housing payments.
• AUS Approval: An “approve/eligible” finding through DU or LP, or manual underwriting if AUS says “refer/eligible.”

What Are Lender Overlays and Why Do They Block You?

Many borrowers with 580 credit scores are shocked when their bank says no, even though FHA says yes. That’s because of lender overlays.

Lenders can impose additional requirements known as overlays, which go beyond the minimum standards set by the FHA.

For instance, while the FHA allows for a 580 credit score with a 3.5% down, a bank may implement an overlay that raises the minimum credit score requirement to 620. The result? You’re denied even though you meet HUD’s requirements. At Gustan Cho Associates, we approve borrowers based on FHA guidelines only — no extra rules, no overlays.

VA Loans for Borrowers with 580 Credit Score

If you’re a veteran or active-duty service member, VA loans may be an even better choice. VA doesn’t set a minimum credit score at all. Many lenders impose their own minimums, but at Gustan Cho Associates, we approve VA loans for borrowers with 580 FICO as long as the AUS gives an approval, or manual underwriting guidelines are met.

VA loans come with some great perks for borrowers. One of the best things about them is that you don’t need a down payment, making buying a home a lot easier. Additionally, VA loans do not come with monthly mortgage insurance, which can help reduce overall housing costs. Furthermore, these loans feature flexible debt-to-income (DTI) limits, especially for individuals with strong compensating factors, allowing for greater lending possibilities.

Non-QM Loans for 580 Credit Score Borrowers

If you can’t qualify for FHA or VA, you may still get mortgage approval with 580 FICO credit score through non-QM loans. These programs use alternative ways to prove income and may allow lower credit scores with bigger down payments.

Examples:

• Bank Statement Loans (use business or personal bank deposits instead of tax returns).
• DSCR Loans (qualify based on rental income).
• No-Doc or Asset-Depletion Loans (prove ability to repay with assets).

Typical requirements:

• 20%–25% down payment.
• Higher interest rates than FHA/VA.
• Flexible on credit score, sometimes down to 500.

Compensating Factors that Can Boost Your Approval Chances

If your DTI is high or you have other risk factors, adding compensating factors can help. For mortgage approval with 580 FICO credit score, these may include:

• Extra cash reserves in the bank.
• Verified rental history with low payment shock.
• Larger down payment.
• Additional income not used to qualify (like overtime, bonuses, or side business income).

These factors tell the underwriter that even though your score is lower, you’re still a safe bet.

How to Improve Your Credit Score Before Getting a Mortgage

Even though you can get a mortgage with a 580 credit score, raising it even a little can get you a better rate. Here are quick-win strategies:

1. Pay down credit cards to under 30% of the limit.
2. Dispute errors on your credit report.
3. Avoid new credit inquiries before applying.
4. Make all payments on time for at least 12 months.

We’ve had borrowers go from 580 to 620 in a few months, which has opened the door to better loan terms.

Manual Underwriting for 580 Credit Score FHA Loans

If AUS doesn’t automatically approve your loan, your file might be up for manual underwriting. This means a real person will check out your case. When going for manual FHA approvals, you’ll need to show a full year of on-time housing payments. Plus, you’ll have to provide a Verification of Rent (VOR) to back up your payment history. Having some strong points in your favor can really boost your application.

We at Gustan Cho Associates handle manual underwriting when others can’t — that’s why many borrowers turn to us after getting turned down elsewhere.

Myths About Mortgage Approval with 580 Credit Score

Myth 1: You can’t get approved unless your score is 620+.

Truth: FHA allows 580 with 3.5% down — overlays are what block most people.

Myth 2: All lenders follow the same rules.

Truth: Guidelines vary. Choosing a no-overlay lender like us makes the difference.

Myth 3: You’ll always pay the highest interest rate.

Truth: Rates depend on the full profile — with compensating factors, you can still get competitive terms.

How Gustan Cho Associates Gets 580 Credit Score Borrowers Approved

We specialize in helping borrowers who were denied elsewhere. Over 35% of our closings are for FHA borrowers with scores between 580 and 619.

Here’s why:

• No overlays — we follow HUD/VA guidelines only.
• Experience with manual underwriting.
• Access to multiple programs, including FHA, VA, and non-QM.
• Fast closings — often in 30 days or less.

Steps to Get Mortgage Approval with 580 Credit Score

1. Call Gustan Cho Associates at 800-900-8569 or apply online at www.gustancho.com.
2. Get pre-approved — we’ll run your file through AUS to see if you qualify automatically or need manual underwriting.
3. Gather documents — income, bank statements, IDs, and credit report.
4. Lock in your rate and start the closing process.

The Bottom Line: Yes, You Can Buy a Home at 580 FICO

Getting mortgage approval with 580 FICO credit score is absolutely possible — but only if you work with the right lender. Don’t let overlays keep you from homeownership. Whether you’re going FHA, VA, or exploring non-QM loans, Gustan Cho Associates can help you get approved quickly and with minimal stress.

Borrowers who need a five-star national mortgage company licensed in 50 states with no overlays and who are experts on mortgage approval with 580 FICO credit score, please contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com.

• Related> Under 620 FICO mortgage approvals
• Related> Can I get mortgage approval with credit scores under 620?

Frequently Asked Questions About Mortgage Approval with 580 FICO Credit Score:

Q: Can I Really Get Mortgage Approval with 580 FICO Credit Score?

A: Yes. FHA allows you to buy a home with just 3.5% down payment if you have at least 580 credit score. At Gustan Cho Associates, we follow FHA rules with no extra lender overlays.

Q: What Loan Programs Work for Mortgage Approval with 580 FICO Credit Score?

A: FHA loans are the most common choice, but you may also qualify for VA loans (if you’re a veteran) or certain non-QM loans with bigger down payments.

Q: How Much Down Payment do I Need for Mortgage Approval with 580 FICO Credit Score?

A: With FHA, you only need 3.5% down. If your score is below 580, FHA requires 10% down. Non-QM loans usually need 20%–25% down.

Q: Why Did Another Lender Deny Me for Mortgage Approval with 580 FICO Credit Score?

A: Many lenders add stricter rules called overlays. For example, they may require a 620 score even though FHA says 580 is fine. Gustan Cho Associates has no overlays.

Q: Can I Get a VA Loan Mortgage Approval with 580 FICO Credit Score?

A: Yes. VA has no minimum score requirement, and we approve VA loans with 580 FICO if you meet all other VA guidelines or manual underwriting rules.

Q: Can I Qualify for Non-QM Mortgage Approval with 580 FICO Credit Score?

A: Yes. Non-QM loans allow alternative income proof, such as bank statements or rental income. These loans usually require higher down payments but are flexible regarding credit scores.

Q: What are the Compensating Factors for Mortgage Approval with 580 FICO Credit Score?

A: Compensating factors include extra savings, low payment shock, bigger down payment, or additional income not used to qualify. These can help you get approved with higher DTI limits.

Q: How Can I Improve My Chances for Mortgage Approval with 580 FICO Credit Score?

A: Pay down credit cards, fix errors on your credit report, avoid new debt, and make all payments on time. Even small credit score boosts can lower your rate.

Q: Can I Still Get Mortgage Approval with 580 FICO Credit Score if AUS Doesn’t Approve Me?

A: Yes. We can manually underwrite your loan if you meet FHA’s manual guidelines, including 12 months of on-time housing payments and rent verification.

Q: How do I Start the Process for Mortgage Approval with 580 FICO Credit Score?

A: Call Gustan Cho Associates at 800-900-8569 or apply at www.gustancho.com. We’ll review your file, get you pre-approved, and guide you to closing.

This article about “Mortgage Approval With 580 FICO Credit Score” was updated on August 12th, 2025.