Buying a house with a credit score below 620

Buying a house with a credit score below 620


FHA guidelines to buy a house you will need a minimum credit score of 580 to qualify for an FHA loan with a minimum 3.5% down payment.

How does an FHA loan work with a credit score below 620? If your credit score is below 620 FHA allows two types of loan approval. Your loan will be approved by Fannie Mae with either an Approve/Eligible or Refer/Eligible or what's called a manual underwriting.

The requirements for both are different. When your loan is an Approve/Eligible your maximum debt-to-income will be 31/43. This means that your mortgage payment will be 31% of your monthly income. And 43% of your monthly debts (mortgage payment, car payment, credit card payments, student loans, etc.) of your monthly income.

If your loan receives an Approve/Eligible and your credit score is below 620 there are no reserves required. You will need to have the 3.5% down payment and either enough funds for closing cost or enough credits to close. FHA does allow the seller to pay up to 6% of the purchase price for closing cost.

If your loan receives a Refer/Eligible this means the maximum debt-to-income ratio should be 31/43 but you will need to have one month's reserves. Reserves must equal or exceed one month's proposed mortgage payment in the bank after closing.

What if my DTI is above 31/43?

Buying a house with a credit score below 620. FHA allows a maximum debt-to-income of 37/47 if you have one compensating factor. Compensating factors can be one of the following three:

1. Cash reserves that equal or exceed three total monthly payments

2. New mortgage housing payment is not more than $100.00 or 5% higher than previous total monthly housing payments

3. Residual income

What if i do not have a credit score?

If you have no credit score FHA guidelines assigns you a credit score of 580. Your loan will be a Refer/Eligible and you will need one months reserve to qualify.  

Are you short funds to close? The FHA no closing cost loan allows all of your closing cost to be rolled into your loan including your appraisal fee, hazard insurance premium and even your escrow account.

Foreclosure - To be eligible for a FHA loan 3 years must have past from the date the bank sold the property.

Seasoning requirements is determined by the type of loan:

  • Conventional loan: the date of sale the lender sold the property
  • Government loan: the date the claim was paid

A borrower whose previous residence or other real property was foreclosed on or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible.


Buying a house with a credit score below 620

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KEYWORDS: Credit Score Needed To Buy House in Florida, FHA Loans Florida,

Buying a house with a credit score below 620


On January 20, 2010 FHA announced a policy change to address risk and strengthen finances. FHA changed the minimum credit scores for new borrowers:

  • New borrowers will now be required to have a minimum credit score of 580 to qualify for FHA's 3.5% down payment program
  • New borrowers with less than a 580 credit score will be required to put down at least 10%
  • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well
  • This changes went into effect in 2010

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