Qualifying For Mortgage With Under 600 Credit Score

Mortgage With Under 600 Credit Score

Gustan Cho Associates

The United States Department of Housing and Urban Development, also known as HUD, is the parent of the Federal Housing Administration, commonly referred as FHA.  The Federal Housing Administration, FHA, is in charge of FHA loans.  FHA is not a mortgage lender and does not originate nor fund residential mortgage loans.  FHA insures banks, credit unions, and mortgage companies who are FHA approved, which meets that these FHA approved mortgage lenders need to meet FHA insurance standards in order for FHA to be able to insure mortgage loans.  The answer to can mortgage loan borrowers qualify for a FHA insured mortgage loan with under 600 credit score, the answer is yes.  Minimum FHA credit score to qualify for a 3.5% down payment home purchase mortgage loan is 580 FICO credit score.  You can qualify for a FHA loan with credit scores under 580 FICO, however, you need a 10% down payment as well as compensating factors.  To meet FHA mortgage lending standards even with under 600 credit scores is that you can have prior bad credit, open collections, charge offs, but you cannot have late payments in the last 12 months.  One late payment that has been seasoned for 6 months may be allowed, but mortgage underwriters really frown upon the fact if the mortgage loan borrower has had late payments in the past 12 months.

Credit Score Under 600 FICO

Mortgage underwriters will examine why you have under 600 credit score?  Mortgage underwriters will review your overall credit history on your credit report and see if you have been timely on your credit for the most part and see where it went wrong where your credit scores is so low.  Under 600 credit score is considered bad credit.  FHA loans are great mortgage loan programs for first time home buyers or home buyers seeking a home loan with bad credit.

Here Is What Underwriters Look At On Borrowers With Credit Score Under 600 FICO


Here are some reasons why your credit score under 600 and there may be some quick fixes on boosting your credit scores.

1. High credit card balances:  If you have high credit card balances compared to your credit limit, this can really drop your credit scores temporarily.  By paying down your credit card balances to 5% of your credit limit, your credit scores will sky rocket right away.

2. No credit: Some consumers have no credit whatsoever.  No credit is the same as bad credit so you need to get started in building credit tradelines.  See if you can have yourself added as an authorized user to a family member’s credit cards and see if you can get 3 secured credit cards with at least a $500 credit limit.  Each secured credit card should be able to boost your credit scores by at least 20 FICO POINTS.

3.  If you had a recent late payment, the chances are that it has plummeted your credit scores.  If you have a creditor who you have been timely for a long time and a good payment history with no lates, contact the creditor who reported you late and see if they can waive and delete the recent late payment off your credit report as a one time courtesy.  Many creditors will do it for a consumer who has never been late and always had a timely payment history.

4. Too many credit inquiries:  If you have credit scores under 700 FICO, do not apply for any unsecured credit cards.  If you get denied by two or more credit cards, do not apply for unsecured credit until your credit scores are higher because each hard credit inquiry will drop your credit scores as much as 5 points each time you apply for credit.

5.  If you have bad credit and need a home loan, contact me at www.gustancho.com or APPLY NOW for a fast pre-approval to see what you qualify for.

Negatives For Borrowers With Under 600 Credit Score

I specialize in helping mortgage borrower’s with under 600 credit score.  Most FHA mortgage lenders do not touch borrower’s with under 600 credit score.  They want borrowers with credit scores of 640 credit scores or higher because they have a higher set of credit standards on top of FHA minimum credit score requirements which is called lender overlays.  There are negative factors for borrowers who have credit scores under 620 FICO credit scores.  First negative is that the maximum debt to income ratios will be capped at 43% instead of 56.9%.  Borrowers with under 600 credit score will get a slightly higher rate on their FHA loans, normally 0.50% higher than those with credit scores of 620 FICO or higher.  Rental verification may be required for borrowers with under 600 credit score.  If you are a home buyer and have credit scores of under 600 FICO, contact me at 262-716-8151 or apply online line by clicking APPLY NOW

Related> Let FHA Loans Help You

Related> 2015 FHA minimum credit scores guidelines

Related> Under 620 credit scores to qualify for mortgage

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.