Home Buying in Austin>Question Details

Maryann Gill…, Renter in Austin, TX

Can I buy a home with a 540 credit score?

Asked by Maryann Gillespie, Austin, TX Mon Jul 8, 2013

Help the community by answering this question:


Trevor Curran’s answer
Good evening Melanie,

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!
1 vote Thank Flag Link Wed Jul 10, 2013
If you have a steady job for at least the past two years, about 10% down, etc. I can probably get you approved with a seller financed deal. In fact, I know of a few condos where they're not even checking the credit score. Feel free to contact me if you are interested.

Joe Jarusinsky, Realtor/Master Instructor, Keller Williams Realty, Austin's #1 Real Estate Company, Ranked #1 by Buyers and Sellers (JD Power & Assoc. 2012) Call 512-261-4415
1 vote Thank Flag Link Mon Jul 8, 2013
Some lenders can start lending at 580 but not 540. Let me know if you need help repairing your credit, I have a lender who can assist you.

Susie Kay, Realtor®
United Real Estate
III Lincoln Centre, 5430 LBJ Freeway #280
Dallas, TX 78240


Servicing your real estate need is my priority!
0 votes Thank Flag Link Sat Jul 13, 2013
No lender I know of will give a loan. You want to be at a minimum of 650, even then I have heard of denials. You will need to boost that score significantly before you will be considered for a loan. If you have old debt, pay it off, but do NOT cancel the account. Keep it revolving, make payments on time and boost that score.

You can fix your score quickly if you just have the funds to pay off debt. After that, you will see your score fly up significantly.
0 votes Thank Flag Link Sat Jul 13, 2013
Hi Melanie,

I suggest you work on your credit. These realtors will tell you yes, but my husband and I have been dealing with bad credit (IRS debt etc. for several years, thankfully over!) and no way, no how on tradition lending.

We used a local company called Credit360consulting that was referred to us by our agent a year or so ago. They are amazing. (and cheap.. you only pay a small amount down, we paid $99.00 because our realtor TRISH JOHNSON [tjjohnson5@msn.com] referred us to their program and only paid for what they removed after that (also very reasonable). Trish is an expert at owner financing pretty much anything. She is with the Trolley Team and Jay & his wife Diana Espinoza run Credit360 Consulting. (jay@credit360consulting.com) If you decide to give them a try, you can also say I referred you (Jeanene Lambert).

It only took them a couple of months to remove so much stuff off my credit. I literally saw our scored rise from the mid 500's to upwards of the 600's in a couple of months. I now have them working on my kids credit too. (my youngest son just was approved on his first home and my other son is having his worked on as we speak). I tried another company a few years ago that was a waste of time/money.. these guys I highly recommend.. ditto to all you other realtors reading this!)

Take care and good luck!~
0 votes Thank Flag Link Sat Jul 13, 2013
that was meant to say *upper 600's! :)
Flag Sat Jul 13, 2013
With the right lender, the right home, and the right rates! Absolutely!
0 votes Thank Flag Link Wed Jul 10, 2013
Thanks for the reply, Mary Jane. How and where would I find this?
Flag Wed Jul 10, 2013
Not quite that low but depending on why it's that low we may be able to help, we could refer you so a reputable company to repair your credit or we might be able to figure something out for you ourselves. Our loan officers are very knowlegable. Call if I can help. 856-491-9401 Tara
0 votes Thank Flag Link Wed Jul 10, 2013
Yes - But you won't have the best interest rate.
0 votes Thank Flag Link Tue Jul 9, 2013
Not with typical financing. I would put that idea on hold and just work on your credit. With a score that bad it will take at least a year or so to get to where you need to be. Understand your problem and find a lender to work with you who understands how to rebuild your credit. You can read my past answers on what you need to do immediately to start the process. Get a secured credit card today and never use more than 30% of it's available credit at anytime. Get a secured installment loan and pay it back as agreed. These are just some of the things you need to do to get your credit back up to where it needs to be.

Hope this helps.

Don Groff | REALTOR® & Mortgage Broker
Austin Real Estate Pros & 360 Lending Group
o 512.669.5599 | m 512.633.4157 | listings@dongroff.com
websites: http://www.AustinListed.com | http://www.360LendingGroup.com
Web Reference: http://www.AustinListed.com
0 votes Thank Flag Link Tue Jul 9, 2013
Dear Melanie,

I just answered a similar question. Most 1st time buyers are frustrated because they don't know what is needed to qualify for a mortgage. Your best bet is to contact a lender that is willing to review your credit with you and give you advice of what you need to do in order to qualify. Don't be discouraged it does take time, but it will happen.

Cara Castrataro
Sales Assoicate
Century 21 Rivera Realty
531 Williamstown Road
Sicklerville, NJ 08081
Phone: 856.404.9260, ext. 198
Fax: 856.885.4895
Cell: 856.896.8078
Email: caracastrataro@gmail.com
Find me on Facebook @ http://www.facebook.com/sjrealtorcaraesposito
0 votes Thank Flag Link Mon Jul 8, 2013
Hello Melanie,

You can buy a house if you pay cash. If you need a loan, you will need to work with a lender to help you work through your credit issues. Please contact me if you'd like a referral.


0 votes Thank Flag Link Mon Jul 8, 2013
It would be hard but you might be able to with lots of cash down and owner finance.
0 votes Thank Flag Link Mon Jul 8, 2013
Probably not. There are several components to a lender putting together a file for loan approval.
1) Credit Score for all borrowers ~ Lenders use a different analysis than you can find online.
2) Job history
3) Income
4) Debts
5) ratio of current debts plus anticipated home's debt, insurance and taxes to income.

0 votes Thank Flag Link Mon Jul 8, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer