Financing in Alabama>Question Details

Chelsea22, Home Buyer in Alabama

Getting an FHA loan with a 530 credit score?

Asked by Chelsea22, Alabama Sun Apr 15, 2012

I currently have a 530 credit score due to some mistakes I made in the past. I used to have over a 700 but got laid off and overloaded myself. I have since paid off a few loans and I currently only have a car payment and a small loan for a lawn mower. The lawn mower has been current every month since I got it (1 year ago) I have had some previous 30 days late on my car payment and have some current 30 days late on it as well but it is current as of now. I am looking at getting a home that is $110,000 and will be putting around $11,000 down on it. Do you think an FHA loan will be possible even with the car payments being late for a few months? I currently make $4720 a month. My car payment is $400 and my lawn mower payment is $140. Thanks in advance for any advice.

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Minimum Fico in today's world for FHA is 620. Loan must get an approve eligible through Fannie Mae Desktop Underwriter. However, what you really need to focus on is time. To get to a 20+ score, you need to be current for a minimum of 12-mos with no lates. You are probably looking at that timeframe unless their are errors on the credit report.
1 vote Thank Flag Link Sun Apr 15, 2012
With a 530 FICO, you are currnetly 50-110 points below acceptable minimum credit scores for an FHA mortgage. You should not have any late paymets or new derogatory items within the last 12-24 months.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at
Licensed in Alabama & Georgia

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle Renovation | VA | USDA | GA Dream | Jumbo Financing
0 votes Thank Flag Link Sun Apr 15, 2012
Here is what I know to be true about FHA and their guideline (this is what Underwriters go by to approve your mortgage).
There are NO "Credit Scores" needed, FHA is a credit driven mortgage program. Now, that's per the Federal Housing Administration (FHA) guideline book. The Credit requirement "FICO Score" requirement are from the bank level. And no you can not go to FHA direct to get a loan.
Banks have their own credit score requirements because they will have to purchase the mortgage back if they loan defaults, kind of a "in house" requirment. I say this so you know you will have to have both working for you, Credit & Trade lines (active credit lines).

Credit history is VERY important. You said you paid off a few loans; what kind of loans? Student, car, credit cards? If you can recharge them do so so it will reactivate those lines. Yes crazy to say run your debt back up but this will give you the history you need (The longer you've had the trade line the better). Do not charge the card to its limit tho, 5% of the total card limit is best (under the FICO companies rules this is the fastest way to increase scores).

If you are not able to recharge credit (opening up new lines is not a good thing either, more of a last resort) then you will have to look for alternative credit lines, meaning things that do not show up on your credit report i.e. phone, utilities, store credits. FHA will look at these and your banker/loan officer will be able to add these trades to your credit report and get a "rescore" from were they pull credit. As long as they have a good pay history it will raise your score.

Being late is bad all the way around, but sometimes can not be avoided (food on the table or car payment late? I would opt for food). Like Mr Smith said time is key, you must have 12 month with no late payments.

There are alternative ways to lend but in these times credit scores and history are so important.

Hope this helps. Also, when you interview a banker tell him/her your situation and they should offer ways to help improve your credit and a way to meet your goals of home ownership. Good bankers are long term just and a Realtor.
0 votes Thank Flag Link Sun Apr 15, 2012
With ML 10-29, HUD did in fact impose a 580 minimum credit score for FHA mortgages on October 4, 2010. Prior to that, HUD did not have a minimum credit score. All lenders will still have their own credit score overlays above HUD minimums. The typical industry minimum is 640+.
Flag Sun Apr 15, 2012
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