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Profile picture for BrianDaub

FHA Loan for Credit Below 580

I am seeing info all over that I should qualify for a loan with my credit score being 551. I have a house picked out. The area offers downpayment grants and and downpayment/closing cost assistance loans through the city. Based on what I make I should qualify for the amount. But I am being told I need a credit score of 620. I want to make an offer but I cannot find a lender to help me. Why not?
  • December 24 2013 - Falcon
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Answers (10)

Unfortunately, your score is too low and is difficult for most lenders to deal with. The lowest lenders like myself are able to go is around 580. If you can bump up your scores to that level, or better yet 620, then you will be in better shape. The simplest way to fix your credit scores is to pay off your debt and revolving credit balance on time. So spend some time carefully watching your finances and building up your scores. Also, it wouldn't hurt to build up more savings, so when the time of purchasing a home comes around, you will be prepared. I hope this helps and good luck!
  • January 03 2014
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Profile picture for janicem flanagan
Listen I went all over tried so hard and got nowheres either.How ever a man named Nick called me and he helped me all the way from a 540 to 632 in less then 3 months! 
  • December 27 2013
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Profile picture for wetdawgs
Your goal of homeownership is reasonable, but perhaps it would be worth your time to work through the steps in a different order.    For example, if in your shoes I'd put the first step as getting credit in order.   Even a 620 FICO score is not a very good score.  It takes up to 700 or higher to be labeled "good" and more to be "excellent" and get the best rates.    It is not surprising that your credit score gets a lot of doors slammed in your face - doesn't feel good but it gives you a clue what you need to do.

Did you directly contact both lenders who posted on the other thread (not just post on the other thread)?  

There is a huge difference between renting at $750 and buying at $500/month.    If you fail to pay rent, you are kicked out and perhaps the landlord misses a month's rent (and you are likely to have the landlord go to small claims court).   If you fail to pay your mortgage you are likely to cost your lender tens of thousands of dollars, if not more.    Did you calculate the $500/month including taxes, insurance and the very high costs of borrowing with a credit score of 551?

There is absolutely nothing wrong with evaluating the process and recognizing there are more steps than you thought before you are ready to buy.   You probably want to buy right, so do it step by step.   Zillow has a home buyer's roadmap that can be helpful.   Myfico.com has some excellent guidance on what is in a score and steps to take to improve it.



  • December 24 2013
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Profile picture for BrianDaub
Nobody is even trying to help me. They just me they need a credit score higher than what I have. They aren't checking my credit history, verifying my employment or my income. Nothing. Just "oh....your credit score is 551? I can't you. Good luck." I would pay less on a mortgage than I am paying in rent. It makes more sense to buy then to rent. If I can afford to rent I can afford to buy. And I can rent an apartment.....yet I can get a mortgage for that would come out to $450/mo when I am paying $725 a mo right now. I don't get this and I don't get why people won't help me even though FHA says that I can do it. I am getting frustrated. I am trying to do this to help myself. To free up more of my income. And to make sure I will continue to have a place to live. And yes even as I am writing this I am checking my credit reports and scores, and looking for ways I can settle some outstanding debts with what I would put down for my down payment in order to boost my score and qualify for the loan and the down payment/closing cost assistance. 
  • December 24 2013
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Brian,

I cannot speak to why you are specifically being denied, most banks have 2 forms of underwriting approval, either the loan meets all traditional standards and can be "auto underwritten" by a computer program, or the loan falls outside the normal parameters and needs to be underwritten manually.  Yours is the second scenario, more is taken into account hen just your credit score, your actual credit history is looked at meaning the bank wants to know why your score is low, second there usually have to be other compensating factors to positivly influnce your case, income, down payment, etc...

Perhaps the lenders you have spoken to are not able to combine your down payment assistance with a manually underwritten loan.  Also when you go to a manual underwrite there is a risk assessment done to the interest rate as well (meaning it goes up usually significantly)

I think the bigger question for you is does it make sense to jump into a house today if you could with a higher interest rate or try to improve your credit score to 620.  Most cases it is not terribly difficult to do so if the derogatory items that made your score 551 are satisfied.  If they are not satisfied it may be another reason why you re having trouble.

Good Luck and Merry Christmas!
  • December 24 2013
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Profile picture for wetdawgs
Have you contacted the lenders in the thread you mention? Click on their photo to get their contact information.  As mentioned before, there are lenders who will go lower but they are not common.  Perhaps the lenders in the other thread can help you find someone who has less stringent overlays in Colorado.   In addition, you need to investigate the down payment assistance programs you are interested in.  Many of them have credit score limits.


  • December 24 2013
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Profile picture for BrianDaub
Ok, well you will have to forgive me. But I would like to know why someone is getting such a completely different response than I am then....

I encourage people to look here. And it really shouldn't matter WHERE this is or WHEN it is (even though this is dating back to September, and it';s in Kirkland Washington) but these people can't seem to help this person enough. Yet I can't seem to find a single person to help me. Is it jus the fact that people here in Colorado have absolutely no willingness to help?

http://www.zillow.com/advice-thread/Credit-score-580-FHA-loan/513210/
  • December 24 2013
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Profile picture for wetdawgs
Lenders are allowed to add what are called "overlays", so it is extremely rare to find a lender who will provide a loan with your current credit scores.  If you do find one, you will pay for the privilege.

So, it is probably time to back up a few steps and focus on what it takes to qualify for a mortgage and have a pre-approval.  Find a good lender who can give you some input.  Then and only then start looking at homes.



  • December 24 2013
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When you go through the down payment assistant programs they require you to have a slightly higher credit score as they are taking a greater risk. My suggestion would be to talk to a lender and have them assist you in getting your score to where it needs to be and then start house hunting.

  • December 24 2013
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Most lenders are going to have overlays on their loan products. And alot of lenders are going to require a score of at least the 620 just like you mentioned. There are a few lenders that will be able to go down lower than that, but they are more rare. You could also try talking with a credit union or a local bank, as they could have different guidelines and give you some options.
  • December 24 2013
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