Is it possible to get a home loan with a credit score of 513? if so, does it make a difference being a first time home buyer?

Asked by Tonya tomblin Buttercup20001, Columbus, OH Mon Feb 13, 2012

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15
Brian Martuc…, Mortgage Broker Or Lender, Bethesda, MD
Sat Apr 18, 2015
We require 620 credit scores so we cannot help directly. I do know there are lenders that will do loans down to a 580 score. But the terms and down payment may be higher. It may be worth it for you to take the time to raise your score to 620 to get the best terms. I think you need to find an experienced lender, well reviewed, who earns your trust, and go through a pre-approval process to see exactly what you can do now with your current score, and then ask what they could do if your score was 620, and you can decide if you think its worth waiting. But a lot of times there are things on your credit report that got your score so low in the first place, like collections, judgments, liens, etc; that may have to be resolved with any lender, even one who will accept a score as low as yours. So waiting may end up being your best choice for several reasons. Please don't be in a rush to buy home, it's the worst mistake you can make. If you have a very low credit score you may have some serious credit issues, and buying a home may simply exacerbate a currently bad credit scenario. Good luck.
1 vote
Priscilla Si…, Agent, Columbus, OH
Tue Jan 14, 2014
If you need assistance to build your credit up, I would be happy to assist you. Keep in mind that Wells Fargo now can go down to a 600 credit score.

Priscilla Sims, Agent.
http://www.yourohioagent.net
Feel free to call or text: 937-605-1094
1 vote
Mark R. Barr…, , Bakersfield, CA
Thu Jan 2, 2014
Large lenders that do loans between 500-579 include First Guaranty Mortgage , First Mortgage Corporation, Sun West, Clear Vision Funding, Pacific Union Financial. Also most major brokers like C2 Financial and First Priority have access to these banks and can get you wholesale pricing. I read an article that loans with FICO score between 500-620 with First Mortgage outperform loans that are 620+. The reason is the underwriting is common sense with much stricter guidelines. The underwriter really have to make sense why your score is low and it cannot be disregard of credit. FHA is the reason these can be done and FHA would not allow these if they had a higher foreclosure rate than good credit clients. Its just common sense underwriting and not automated underwriting.
1 vote
Lory Kim, Agent, Gahanna, OH
Thu Jan 2, 2014
connect with a solid mortgage broker who offers different programs otherwise assist with credit repair , if they can't buy today later on will work better.
1 vote
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Thu Sep 26, 2013
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1 vote
, ,
Tue Feb 14, 2012
A legitimate loan officer would not be able to approve a loan with such a low credit score, but even if you find someone that says yes they are not your friend. If you have problems that are causing your scores to be that low the best path is to look internally and fix the problem first, then buy a home. Otherwise you are just putting yourself at more risk. Good luck,
1 vote
Great advice Jim! The voice of prudent lending advice for HomeBuyers in 2012! Trevor Curran NMLS #40140
Flag Mon Aug 6, 2012
Bev Woodford, Agent, Columbus, OH
Wed Jan 15, 2014
I have not heard of being able to purchase with a score less than 580. I would suggest you contact a lender and get involved in a credit repair program. Good luck.
0 votes
Mark Schuler, Agent, Westerville, OH
Wed Sep 26, 2012
Most of these posts are saying the same thing. Its not likely you can get a loan with a 513 score. Have you considered Lease Options?

Lease options provide you with the experience of home ownership without the loan. You can find many motivated sellers needing to move out of your area. Some times a deal can be struck. While in the option period you need to work on your credit score and pay you bills on time. Then after 13 months minimum you can refinance.

Most realtors don't do lease options because its hard for them to get paid. I specialize in creative financing. Call me.
0 votes
, ,
Mon Aug 6, 2012
Good morning Buttercup20001,

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. https://www.consumer-action.org

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: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm


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
0 votes
Bev Woodford, Agent, Columbus, OH
Fri Aug 3, 2012
The lowest I have heard about is 580 with a larger downpayment. There are lot of repair companies, but you should beware if they ask for upfront money.
0 votes
Mark R. Barr…, , Bakersfield, CA
Tue Feb 14, 2012
The question asked if it was possible, not was it moral or fair. And yes it is possible for good reason. There are a small group of people who deserve a home that have low credit scores and that is what FHA intended on, when they allow 500+ FICO people to get homes. Each case is different and the underwriter will not allow the loan to close if they don't believe you will make the payment because it has to get insured by FHA and if you don't make the payment on time for a set period of time then the lender will have to buy back the loan. Now days the lender has skin in the game so people who don't belong in homes don't get one in general. I remember when I went to say Hi to a friend at Countrywide 6 years ago that she introduced me to the manager. I told the manager I do FHA senior Reverse mortgages (and still do). She said a legitimate loan officer wouldn't do that loan and that I was basically sub par. Well one year later Countrywide was able to do that loan and that same manager was marketing them. I even gave her counsel on how to do her moms reverse mortgage. When people don't have the product I've learned the talk bad about it. When I worked at Bank of America we were taught every lender but them was shady. i.e. People should only be in homes with 680 FICO, no past credit issues regardless the reason and qualify for 41% DTI regardless if they have a spouse income we are not using. The tried to brain wash this as the truth. In a perfect world this is right on but life is complex at times and each situation deserves a chance. This loan wouldn't be there if it didn't have a reason and a purpose to fit that small deserving group that might have low score. Each situation is different so to judge without all the facts is premature in my opinion. I hope I answered the question you asked.
0 votes
Bill Buettner, Agent, Gahanna, OH
Tue Feb 14, 2012
Buttercup,
It might be possible but you are going to have to put down more than 3.5%, I would guess 10%+. That still does not mean you can get a loan. Past credit issues and current income need to be addressed as well. (and this is not the forum to do that) Your scores are low for a reason(s), buying a house is not going to fix it. You will only go further into debt making that much harder to restore your credit.

My advice to you is, work on getting your credit scores up. Save money for a down payment and pay off as much debt as you can. You should consider taking a part time job for the extra income that will allow you to accomplish these things.

Good luck,
Bill
0 votes
Mark R. Barr…, , Bakersfield, CA
Tue Feb 14, 2012
The rate for your loan today for 500 FICO, $100,000 FHA loan with 10% down would be 4.25%, $1,110 Underwriting fee(no processing, Admin or other lender fees) 1.125% discount points and no origination. Market rate today is 3.75% with a lender credit so the rate is about .5% higher with 500 FICO plus the down payment on FHA loans under 580 FICO are 10% compared to 3.5% above 580 FICO. If you wait to get the higher FICO rates could be higher anyway and you gained nothing. But who knows.

500- 620 FICO WITH Fannie Mae (DU/DO) Approval:

• The DU approval must reflect the max DTI ratios to be no greater than 43%. Any exceptions to exceed this ratio would be reviewed on a case by case basis only.
• Strong compensating factors
• Verification of rent by providing 12 months cancelled checks or a VOR from a property management company or a credit supplement showing the property management company verified the rent. If the borrower lived with a family member or paid cash for rent, borrower to provide a signed budget letter. (Note: A rental reference from a management company with payment history for the most recent 12 months may be used in lieu of 12 months of cancelled checks.)
• Collections/Charge-Offs less than 24 months old and greater than $5000.00 will be reviewed on a case-by-case basis and requirement for payoff is at underwriter’s discretion
• Co-borrowers or co-signers are permitted as long as they are immediate family members; proof of relationship will be required
Other blood relatives (aunts, uncles, cousins etc.) will be permitted and the occupant borrower DTI cannot exceed 43%

Manual Underwrites:

• Maximum ratios for a manual underwrite are 40/43 and the file must reflect two compensating factors.
• Verification of rent by providing 12 months cancelled checks or a VOR from a property management company or a credit supplement showing the property management company verified the rent. If the borrower lived with a family member, borrower to provide a signed budget letter. (Note: A rental reference from a management company with payment history for the most recent 12 months may be used in lieu of 12 months of cancelled checks.)
• A letter of explanation for all inquiries and all derogatory credit regardless of the date. The explanation must make sense and be consistent with other credit information in the file.
• Borrower’s credit history cannot include a late payment within the past 12 months on any account. Borrowers with an abundance of poor credit history cannot provide alternative credit to compensate for past poor credit.
• Collections in excess of $1000.00 may need to be paid at the discretion of the underwriter.
• Co-borrowers or co-signers are permitted as long as they are immediate family members; proof of relationship will be required
Other blood relatives (aunts, uncles, cousins etc.) will be permitted and the occupant borrower DTI cannot exceed 43%
• When the DU/Total Scorecard findings cannot be validated, a downgrade to a manual underwrite is required.
0 votes
Dan Tabit, Agent, Issaquah, WA
Mon Feb 13, 2012
Buttercup,
Probably not. It you could find a lender the terms would not be favorable, high rates, fees, large down payment required.
I agree with Carl, spend some time working on your credit. Save some money, establish and live with a budget for a while.
0 votes
Carl Henker, , 95928
Mon Feb 13, 2012
Take the tiem to work on improving your credit scores first. Not sure anyone has a program that will work with scores in your range. If you do find a lender the cost will be high. Being a first time buyer will not give you an advantage.
0 votes
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