-
Can I get a mortgage with under 580 FICO credit scores
Can I get a mortgage with under 580 FICO credit scores?
-
1 Reply
-
Yes, you can! You can get a home loan with a FICO credit score of less than 580. Nevertheless, some factors should be considered. The terms may be better than those for someone with higher credit. So here is what you need to know.
FHA Loans:
500-579 Credit Score: Still eligible for an FHA loan but must come up with at least 10% as a down payment.
Non-QM Loans:
Non-qualified mortgage (Non-QM) loans are for borrowers who don’t fit traditional lending criteria. Therefore, they have more flexible underwriting requirements that could accommodate persons with scores below 580. However, these mortgages often carry higher interest rates and require larger down payments.
VA Loans:
The VA does not set a minimum credit score requirement. However, many lenders want to see at least 580 to fund any money on this type of mortgage. Some may go lower depending on their risk appetite. If you’re an active duty military member or veteran, shopping multiple lenders within this space may save time!
USDA Loans:
Typically, USDA loans require a minimum 580 score to secure financing. Certain underwriters may consider an exception for strong compensating factors within the borrower’s profile. These mortgages are only available in qualifying rural areas.
Hard Money Loans:
Hard money loans are short-term, high-interest rate loans backed by real estate. They can work even if your credit is bad, but expect greater costs and fees, which are limited mainly to investment properties or temporary funding scenarios.
Compensating Factors:
All hope is still possible when getting a mortgage with subprime credit! You can still qualify if you have compensating factors such as;
- Higher down payment than required.
- Low debt-to-income ratio (DTI).
- A good amount of cash reserves or savings.
- Stable employment history.
Lender Overlays:
Remember that the HUD, the parent of FHA, allows for credit scores as low as 500. However, most lenders have lender overlays. Lender overlays are additional mortgage lending requirements on top of the minimum HUD guidelines set by individual lenders. Most lenders have lender overlays and guidelines that require a minimum of 580 or higher. Borrowers must shop around and find a lender who will work with what you’ve got.
In conclusion, getting approved for a home loan often means putting more money down when your score falls below 580. Borrowers must pick the right lender and consider other loan types. A mortgage company specializing in working with people with less-than-perfect credit can guide them through their options based on their circumstances.