Financing in 04103>Question Details

Nick, Other/Just Looking in Portland, ME

Are there first time home buyer options for a credit score of 600-620? Is it better to wait a few months to try and increase credit score?

Asked by Nick, Portland, ME Tue Aug 2, 2011

What is a minimum credit score allowing more financing options for a first time buyer?

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With a 10% down payment FHA loans are available with a 10% down payment. If you want to put less than 10% down with FHA financing then you'll need to have a 580, which it appears you have (where did you get your scores from?), but if you are using a 660 score as a barometer, you will see about .250% higher interest rates with a 620 score than a 660 score, and usually anywhere from .500%-1% higher rate with a 580 score. For scores less than 640 lenders generally have more restrictive qualifying guidelines, including needing to come up with the the entire down payment your self, lower debt ratio limits/qualification limits, and requiring no blemishes on credit for 12-24 months.

MaineHousing has a down payment assistance program called "Gift of Green" which provides up to $2k with down payment/closing cost assistance:… and Portland even has an assistance program too:… but it does restrict you to using their mortgage programs/less choice of lenders.

If you buy outside of Portland, like for example in Westbrook/Falmouth/Scarborough, you may be eligible for USDA financing (income limits apply) which is 100% financing/no down payment, and if the home appraises for over the purchase price you can use that difference to finance your closing costs. Lenders are preferring a 640 score for that program since it allows them to go easier regarding what is on your credit that is bringing your scores down. If your income fits within the "Direct" limits, then you can even bypass a mortgage lender and apply directly with USDA, but prepared for a wait, it usually takes about 2 months to get pre-approved and they can run out of funds (typically towards end of the fiscal year, September) is the website to check for eligible areas & if your income (it's household income, not just the people on the loan) would be eligible. Interest rates are very low too (just like FHA's).

Conventional financing could potentially be another option, but with a 620 score & less than 10-20% down, it'd be on the tougher side.

If you need assistance figuring out a plan on how to get yourself into the best position to qualify I'd be happy to help.

Shane Milne | Loan Officer in Orange County, CA | NMLS #81195
Direct local #'s: 949-273-4161 or 646-257-4842
Lending in all 50 states, all types of mortgages
1 vote Thank Flag Link Wed Aug 3, 2011
Good evening Nick,

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.…

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140

*If you thought my answer was helpful, please give me a “Thumbs Up” or “Best Answer.” Thanks!
0 votes Thank Flag Link Wed Jul 10, 2013
There are a few FHA lenders that offer manual underwriting for credit scores at this level. However, my personal experience is that it is often easier to simply manage your score to the next tier so you can open up more financing options as opposed to trying to qualify for the few "sub-prime" FHA loan products that still exist. My company invested in various programs that allow us to run scenarios that will determine what we can do (if anything) to make an immediate impact on your credit scores. We then can implement those plans and request a rapid rescore to hopefully qualify you for a better loan product. I am usually able to accomplish all this in under a week. If we can at least get your score to 620 I can qualify you for Maine State Housing. If you would like to try it out feel free to submit an application online at my website or give me a call. My office is in Windham and I am constantly in Portland, including for a lunch meeting today at Dimillos. Good luck!
Web Reference:
0 votes Thank Flag Link Wed Aug 3, 2011
Nick, yes there are. You could wait, but there are indications that interest rates could be higher than they are now, which would reduce your purchasing power. If you don't already have a buyer agent and lender on your team, it might make sense to have a chat with one of us.
0 votes Thank Flag Link Tue Aug 2, 2011
There is very littl options with scores like that.

I would suggest contacting a lender that has knowledge of credit and can guide you in the right direction.

Usally what you may think is logical in fixing your score will actually make it worst.

Best of luck and if you have any questions, feel free to contact me.

BBVA Compass
Scott Mendez
Mortgage Banking –MBO– NMLS# 595263
Tel. 480-893-5858 - Mobile 480-203-6183 –
5115 E. Baseline Rd. Gilbert AZ 85234
Visit My Website
0 votes Thank Flag Link Tue Aug 2, 2011
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