South Dakota FHA Lenders for Under 600 FICO: How to Get Approved for a Mortgage in 2025
Are you looking for South Dakota FHA lenders for under 600 FICO? If your credit score is below 600, you may have been told by banks and lenders that you don’t qualify for an FHA loan—but that’s not true.
At Gustan Cho Associates, we specialize in helping borrowers with low credit scores get approved for an FHA loan. While most lenders have strict credit score requirements (lender overlays), we follow HUD’s minimum FHA guidelines. You can still get a mortgage—even with a credit score as low as 500.
If you’re struggling with credit issues, recent late payments, or high debt-to-income ratios, this guide will show you how to get pre-approved for an FHA loan in South Dakota.
Can You Get an FHA Loan With a Credit Score Below 600?
Yes! The HUD guidelines for FHA loans allow borrowers with credit scores down to 500 to qualify. However, there are different requirements based on your credit score range:
- 580 or higher → 3.5% down payment required
- 500 to 579 → 10% down payment required
- Below 500 → Not eligible for FHA financing
Most banks and lenders in the state have their own extra rules, called lender overlays, which are stricter than the normal FHA guidelines. They might not approve your loan application based on your credit score. It’s important to talk to different South Dakota FHA lenders for under 600 FICO to see your options.
Gustan Cho Associates, we have no lender overlays on FHA loans, which means we can approve borrowers who meet HUD’s minimum requirements—even with credit scores under 600.
Which Lenders Accept Borrowers With Credit Scores Under 600 in South Dakota?
Not all FHA lenders in South Dakota accept borrowers with credit scores under 600. Many lenders require a 620-640 FICO score, even though HUD only requires 580. Suppose you’re looking for South Dakota FHA lenders for under 600 FICO. In that case, you need a lender with no overlays—like Gustan Cho Associates.
Why Choose Us?
- We follow HUD’s minimum guidelines (not stricter lender overlays).
- We approve borrowers down to 500 FICO with the correct down payment.
- Fast approvals and closings—no long waiting periods.
- We are licensed in 48 states, including South Dakota.
Even if you have collections, charge-offs, or past credit issues, we can help you get approved for an FHA loan.
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What Are the FHA Loan Requirements for Borrowers Under 600 FICO?
It’s important to understand that options are available even with a lower score. But first, you’ll want to check with South Dakota FHA lenders for under 600 FICO. Here’s what you need to qualify for an FHA loan in South Dakota:
1. Minimum Credit Score Requirements
If you have a FICO score of 580 or higher, many South Dakota FHA lenders for under 600 FICO will let you make a down payment of just 3.5%. This means that if you’re buying a home for $200,000, you’d only need to put down $7,000 to get started, making homeownership more accessible.
On the other hand, if your credit score ranges from 500 to 579, the down payment increases to 10%. So, for that same $200,000 home, you’d need to come up with $20,000 for the down payment.
2. Debt-to-Income (DTI) Ratio Requirements
If your credit score is below 580, many South Dakota FHA lenders for under 600 FICO will typically require that your DTI ratio not exceed 43%.
If your credit score is at least 580, you could potentially increase your DTI ratio a little more, permitting it to reach up to 56.9%. However, lenders generally want to see some compensating factors to qualify for that higher ratio. These could be a larger down payment, a steady job with a good income, or significant savings in the bank.
3. No Late Payments in the Last 12 Months
While FHA loans allow bad credit, recent late payments can be a problem. If you have a late payment within the past year, it may require a manual underwrite with compensating factors like savings, stable income, or low DTI.
4. Collections & Charge-Offs Are Allowed
Unlike conventional loans, FHA loans do not require collection accounts to be paid off. You can qualify even if you have outstanding collections or charge-offs—but large unpaid debts may impact your DTI ratio.
5. Manual Underwriting for Lower Credit Scores
You may need a manual underwrite if your credit score is under 600. This means a lender reviews your file manually to determine approval. You may need:
- Stable job history
- Savings or reserves
- Strong rental payment history
If you’re looking for help, check with South Dakota FHA lenders for under 600 FICO scores, like Gustan Cho Associates. We specialize in manual underwriting for borrowers with FICOs under 600 who need an FHA loan.
How Can You Boost Your Credit Score Prior to Applying for an FHA Loan?
If your credit score is under 600, here are some easy ways to improve it before you apply for a loan through South Dakota FHA lenders for under 600 FICO:
- Pay down credit card balances – Keeping credit utilization below 10% can increase scores by 20-50 points.
- Remove late payments – Contact creditors and ask for a “goodwill deletion” if you have a recent late payment.
- Become an authorized user – Adding yourself to a family member’s credit card can boost your score instantly.
- Open 3 secured credit cards – Each new secured credit card can increase your FICO by 20+ points within 6 months.
South Dakota FHA lenders for under 600 FICO can review your credit report and help you get mortgage-ready fast.
Can You Get an FHA Loan With Outstanding Collections?
Yes! FHA loans do not require you to pay off collections to qualify. However, if the total non-medical collection balance is over $2,000, lenders must count 5% of the balance toward your DTI ratio—even if you aren’t making payments.
Example: If you have $5,000 that you owe and it’s been sent to collections, lenders might look at it this way: they could add about 5% of that amount to your debt-to-income ratio (DTI). That’s an extra $250 each month when they check your finances.
If collections are medical debts, they are excluded from DTI calculations. Knowing these numbers can help you plan better when trying to secure a loan with South Dakota FHA lenders for under 600 FICO.
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Are Interest Rates Higher for Borrowers With Under 600 Credit Scores?
If you’re looking for a loan and have a credit score under 600, South Dakota FHA lenders for under 600 FICO can be a good option. But if your credit score is under 600, you may pay 0.50% higher than someone with a 640+ score.
Example: If your score is between 580 and 600, you might see an FHA rate of around 6.75%. On the flip side, if your score is above that, like 620 or higher, you could get a better rate at 6.25% Even with slightly higher rates, FHA loans are still the best mortgage option for low-credit borrowers.
Get Pre-Approved Today With a South Dakota FHA Lender for Under 600 FICO
If you’ve been denied by other lenders because of your credit score, we can help! Why Choose Gustan Cho Associates?
- No lender overlays – We follow FHA guidelines!
- Credit scores down to 500 accepted
- Manual underwriting available for low-credit borrowers
- Fast closings – No long waiting periods
📞 Call or text us at 800-900-8569
📩 Email us at gcho@gustancho.com
📝 Apply online now!
We help South Dakota homebuyers with credit scores under 600 get approved for FHA loans—even when other lenders say no. Let’s get you into your dream home today!
Final Thoughts
Finding South Dakota FHA lenders for under 600 FICO can be challenging. At Gustan Cho Associates, we are committed to helping you buy a home, no matter your credit score. Apply today and take the first step toward homeownership in South Dakota!
Frequently Asked Questions About South Dakota FHA Lenders for Under 600 FICO:
Q: Can I Get an FHA Loan in South Dakota With a Credit Score Under 600?
A: Yes, FHA loans let borrowers with credit scores as low as 500 qualify. If your score is below 580, you must pay 10% down instead of 3.5%. Some South Dakota FHA lenders for under 600 FICO, like Gustan Cho Associates, specialize in low-credit borrowers and offer approvals with no extra overlays.
Q: What is the Lowest Credit Score Required for an FHA Loan?
A: HUD requires a minimum of 500 FICO for an FHA loan. However, if your score is 500-579, you’ll need a 10% down payment. If your credit score is 580 or higher, you only need 3.5% down. Many South Dakota FHA lenders for under 600 FICO impose stricter rules, but Gustan Cho Associates follows HUD’s guidelines with no extra requirements.
Q: Do FHA Lenders in South Dakota Require a 620 Credit Score?
A: Most traditional lenders require a 620-640 credit score due to their internal rules (lender overlays). However, HUD’s actual requirement is 580 for 3.5% down or 500 for 10% down. They have overlays if a lender tells you that you need 620 or higher. At Gustan Cho Associates, we work with South Dakota FHA lenders for under 600 FICO who approve loans without lender overlays.
Q: How Can I Improve My Credit Score to Qualify for an FHA Loan?
A: If your score is under 600, here are quick ways to boost it:
- Pay credit card balances below 10% of the limit for a quick score boost.
- Request a goodwill deletion from creditors for recent late payments.
- Get added as an authorized user on a reliable family member’s credit card.
- Open 2-3 secured credit cards (each can raise your score by 20+ points in months).
Q: Can I be Eligible for an FHA Loan if I have Collections Listed on My Credit Report?
A: Yes! The FHA does not require you to pay off collections to qualify. However, if your total non-medical collections are over $2,000, lenders must include 5% of that amount when calculating your debt-to-income (DTI) ratio. Medical collections are excluded from this rule.
If you have collections, it’s still possible to get approved by South Dakota FHA lenders for under 600 FICO, but large unpaid collections may impact your DTI ratio.
Q: How Does Manual Underwriting Work for FHA Loans?
A: If your credit score is under 600, you may need manual underwriting, which means a lender reviews your application by hand instead of using an automated system. Manual underwriting may require the following:
- Stable employment history (2+ years in the same field)
- 12 months of on-time rent payments
- Compensating factors like savings or a low DTI
Some South Dakota FHA lenders for under 600 FICO, including Gustan Cho Associates, specialize in manual underwriting to help approve low-credit borrowers.
Q: Will My Interest Rate Be Higher If My Credit Score Is Under 600?
A: Yes, borrowers with under 600 FICO scores may have a slightly higher interest rate—about 0.50% more than those with a 620+ score.
Q: How Much Down Payment Do I Need for an FHA Loan in South Dakota?
A: The amount you need for a down payment depends on your credit score:
- 580+ FICO → 3.5% down
- 500-579 FICO → 10% down
Many South Dakota FHA lenders for under 600 FICO will not approve low-credit borrowers due to lender overlays. Gustan Cho Associates adheres to HUD regulations and accepts FHA loans with a minimal down payment requirement.
Q: What is the Timeframe for Receiving Approval for an FHA loan if You have a Low Credit Score?
A: Most FHA loans close within 30-45 days, but if manual underwriting is needed, it may take a little longer.
Q: How Can I Apply for an FHA Loan With a Low Credit Score?
A: The first step is getting pre-approved with a lender specializing in low-credit borrowers. Gustan Cho Associates helps borrowers in South Dakota, and 48 other states qualify for FHA loans with credit scores as low as 500.
This blog about “South Dakota FHA Lenders For Under 600 FICO With Collections” was updated on February 7th, 2025.
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