Financing in 24151>Question Details

Elizabeth, Renter in Rocky Mount, VA

Is it possible to get an FHA or USDA loan with a credit score under 620?

Asked by Elizabeth, Rocky Mount, VA Sun Dec 4, 2011

My husband and I would like to buy a house but we both have poor credit. His score is 618 according to When I tried to get mine, I was told it couldn't be calculated because I have a thin credit file. The negative items on my credit report are hospital or doctor bills (no health insurance). We've been renting the same place for the past 4 years, but we need something bigger now that we have 3 kids. We have up to $5000 for a down payment and are only looking at homes under $100k. I'm wary of applying with too many lenders because I've heard a lot of inquiries can lower your score, which would make it even worse for us. So basically I want to know, should we try for an FHA or USDA loan or keep plugging along with renting and working on improving our credit scores?

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Actually you have a 30 day window to have your credit ran by as many mortgage companies as you want and it will not affect your score, it's for rate shopping. You can get approved with a 620 for FHA, I have a great place I send my clients with scores under a 640 to get approved. If any company can get you approved its the The Lenders Network

Good Luck!
5 votes Thank Flag Link Tue Jul 2, 2013
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
Web Reference:
1 vote Thank Flag Link Mon Dec 5, 2011
my understanding FHA Loans can be obtained with as low as a credit of 580 the issue is the threash hold of the bank. For the most part the banks I'm use to working with their minimum is a credit score of 640. Every bank is different I would call them and ask this question before having them run your credit.
0 votes Thank Flag Link Sat Dec 10, 2011
Hi, Elizabeth. Best way to answer your quuestion is by having a sit down consultation with a licensed loan officer. If you're working with a realtor, they should be able recommend and/or fine a lender willing to lend at a 620. Next step is to get in front of the loan officer inorder to get fully preapproved; something which involves reviewing not only your credit score and history, but also income, employment and assets. Furthermore, the higher your score, the lower you interest rate, monthly mortgage, and/or the more you may be able to get in lender credits to help pay most if not all your closing costs. I'm an advocate of keeping as much of your momey in your pocket as possible. Especially when the housing market has yet to bottom out.

Furthemore, the preapproval consultation should be free, and you may find that much is not required of you to greatly improve your score and chances. Good luck!
0 votes Thank Flag Link Wed Dec 7, 2011
I had a low credit score (607) and was just recently approved for an FHA mortgage. I had to document that:
1. I had no outstanding collections on my credit;
2. I had the income to make the mortgage payment
3. I was employed over a period of time.

My mortgage consultant then had my file manually underwritten. It too about 3 weeks (due to the closing crush around the thanksgiving holiday) to hear an answer, but I was approved in the long run and are now looking for a home. My husband is a foreign national and has not been here long enough so we were only approved on my salary. You may want to investigate getting approved with just the person who has the better credit. Unfortunately, that will decrease you mortgage approval amount. However, that may be a benefit in disguise. My husband and I are happy to have the cushion of his salary.

I worked with Ruth Bucher - Not a sub prime lender and she was awesome.
0 votes Thank Flag Link Wed Dec 7, 2011
Your rate would not be that bad, if it is available. With rates at historic lows and non-conforming silly loans gone, you would still be looking at an excellent rate. If things were to stay flat for a while you could always refinance if it made sense or if things go up between now and when you might wait, the rate you could get now with your current credit may look really good.
I would meet with a lender and discuss your situation. Consider doing some simple credit repair, paying down revolving balances, dispute any inaccuracies and see where this takes you.
0 votes Thank Flag Link Tue Dec 6, 2011
The best thing to do is remove the assumptions and speculation by speaking with a lender that can outline all of your options for you.
0 votes Thank Flag Link Tue Dec 6, 2011
Thank you all for the great advice! I'm assuming even if we were able to find a lender to give us a mortgage with our current scores, we'd have a pretty high interest rate. Would it be smart to look for a bigger place with a rent to own option? I'm wary of those because if the lease period runs out and we still can't get a loan, we'd be out a lot more money than if we just did a regular rental.
0 votes Thank Flag Link Tue Dec 6, 2011
Just about all lenders require or 620 or better for USDA financing. If your husband is at a 618 it should not be hard too hard to get him over a 620. If for some reason that is not possible we can actually go down to a 580 on FHA.

Here is some more information on the USDA program:…

Some information on credit:…
0 votes Thank Flag Link Tue Dec 6, 2011
Hi Elizabeth,
FHA and USDA loans do not require stellar credit so you may quilify. Do be advised government back loans are just that government backed therefore you are still going through a lender and lenders have bad attitudes towards people with a bad credit history. We have many costumers that had a commitment to lend but in the eleventh hour something came up and the deal fell through. Be careful

Good Luck
Bob Patrick
Buy a home after foreclosure, short sale, deed-in-lieu-of or bankruptcy expert
Movin-On LLC
Helping families/people that have lost their home get back into another in as little as 6 months
0 votes Thank Flag Link Mon Dec 5, 2011
If you have no credit but collection accounts, you are not getting a mortgage. Go to your local non profit housing group for credit counseling. The counselor will go over your credit report with you and tell you what you need to do. Listen to them. Your credit not only affects you getting a mortgage but jobs, credit cards and insurance.
0 votes Thank Flag Link Mon Dec 5, 2011
It's possible, but not guaranteed. FHA has a set of underwriting requirements but lenders who provide FHA loans also have their own that may be more restrictive. It's also possible that your credit scores will be different when you have a mortgage lender obtain them. Lenders use the middle score of the weaker borrower. You could be higher or lower, but the only way to find out is to apply.
Prior to applying discuss your concerns with the lender. If they believe you will not qualify, they may hold off. On the other hand, there are various programs which exist that you might be approved for, or have suggestions for legitimate ways to improve your scores fairly quickly.
One last thought, a credit pull reduces your score about 3 points. If you have multiple reports from various mortgage lenders within 10 days, they are not supposed to be reflected.
0 votes Thank Flag Link Sun Dec 4, 2011
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