Monique Hall, Both Buyer and Seller in Milwaukee County, WI

Any lenders that will qualify a conventional loan with 610 credit score and 12 months good payment history? 7400/mo. income; 2300/mo debt.

Asked by Monique Hall, Milwaukee County, WI Mon Oct 24, 2011

I am looking for lenders besides Wells Fargo that has flex programs for conventional loans. I am interested in a 97/3 based on 12 month payment history. I only have a middle Fico of 610. I currently own a home that has an FHA loan that I will rent out. Wells Fargo (WF) will not accept it as rental property because it is a single family home. I have an interested renter who would pay $800/ month. My mortgage with taxes and insurance is 1100/ month. WF wants to use the current home against total home loan amount, which only leaves about 130,000 left to borrow. Are there any extenuating circumstances such as my current home only being a 2 bedroom and my two children are opposite sex and cannot continue to share a room. Someone thought that because of this I may be able to qualify or a second FHA or maybe a private mortgage broker could manually underwrite this. Do you know any that will in my area?

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Jessica Bate…, Agent, Beverly Hills, CA
Tue Jul 16, 2013
Probably not but FHA is a great loan for you and really isn't credit score driven, it's the Banks and Lenders that set those score requirements. There are a few lenders that go down to 580 with FHA, I personally have closed on several homes with clients around and under 600. I recommend all my clients that have credit issues to check with The Lenders Network, check them out. If anyone can get you approved they can!
2 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Wed Oct 26, 2011
Increasing your credit score isn't going to accomplish what you need to do - it's one of the requirements but that alone won't cut it. As it appears it is your debt to income ratio that is limiting what you can qualify for - because you said that Wells Fargo not allowing you to use the rental income from your current home which you plan to rent out is what is preventing you from qualifying for more than $130k.

The situation you are in isn't uncommon, someone wants to upgrade to a larger home in the same area because their family has grown. There becomes an issue when people cannot qualify for both their existing & new proposed mortgage payments based on their income - so they need to use rental income from the home they are vacating in order to do so. In order to use rental income in that situation, lenders require that you have a certain amount of equity in the home you are vacating, to prevent you from "buying & bailing" on your old home's mortgage by not making the payments. Without the proper amount of equity in the property lenders feel you will just up & walk away, because you don't have much to lose. The amount of equity that they are looking for is 25% if you are trying to qualify for a new FHA loan, or 30% if you are trying to qualify for a conforming loan program (Fannie Mae/Freddie Mac).

So without that equity you'd need to come up with some creative ways to accomplish what you are looking to do. One client of mine was desperate enough to make their situation work out so they would up moving out of their home and into a rental, and rented out their home, claimed the rental income on their tax returns, and then it is considered an existing rental property (and not a primary residence converted to a rental property) and the underwriters permitted the rental income to qualify without having any equity (their home was actually upside down, just like yours).
1 vote
Monique Hall, Both Buyer And Seller, Milwaukee County, WI
Tue Oct 25, 2011
I do not have 25% equity in the home so I guess I couldn't qualify for a second FHA, although I have compelling evidence that my current home is too small for my growing family. One of my dependents has no room to sleep and in the room with another sibling who is opposite sex. It's just not a healthy situation. I guess the answer to my question is to just wait and continue to make on-time payments in hopes that my credit score increases really quickly.

Shane we have been in the home since 2003 our payment history has been good with a few lates in 2009 when we experienced some unemployment due to layoffs. During that time Flagstar bank offered to work with us and do a modification to bring us current and lower monthly payment. Well, at the time I got all of my paperwork to them the mortgage was 60days late by that time. I went back to work during that time and was going to double up on payments. They asked me not to send in any monies. I sent the money in anyway. They put the money in my escrow. It took them 9 months to complete it. They put late payments on my credit report for the time that it took them to handle the business that should have been done within three months. I was penalized for them being understaffed and unable to get to my file. It wasn't until March 2010, when I threatened legal action, that they eventually pulled the file and handled it. Who knows how long it would have taken them if I hadn't threatened them. So, since that time there have been no late payments. I then did further investigation and there were 83 pages of claims against flagstar for same recklessness of business. Many other people have a claim against them for boosting the value of the homes so that people could refinance, when they knew full well that the home was not worth what they said. Well enough about that bank. So to answer your question no I do not have that type of equity in the home. I am actually upside down. I have no plans to sell it. In fact I would like to keep it. It is just is not large enough for my husband, I and two children. It is a two bedroom home. I have a 21 year daughter and granddaughter who I would love them to rent out and eventually keep.
0 votes
Wayne Stockw…, Agent, Black River Falls, WI
Tue Oct 25, 2011
Try Andrew @ 414-810-9397 (NMLS 20092). He does a great job for us.
0 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Tue Oct 25, 2011
Good morning Monique,

Unless you have substantial equity in your existing home (at least 25%), AND you can demonstrate a compelling reason for needing another home while keeping your existing home, it is unlikely you could be approved for another FHA loan. Further, the question is this: how long have you had your existing home and have ALL your mortgage payments been made on time?

Underwriting isn't an objective science. It's very much subjective and based on reviewing the entire loan profile. With the limited information you provided here, not the least of which is the low credit score, I do not believe there is a Lender who could approve you for mortgage financing at this time.

I'd strongly recommend working on increasing both your equity position and your credit score. You might also consider speaking with a local Mortgage Banker,a Loan Officer with more than 10 years experience.

Trevor Curran NMLS#40140
0 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Tue Oct 25, 2011
You are permitted to obtain a second FHA insured primary residence loan when the existing home no longer meets your family’s needs due to increase in the number of legal dependents. Documentation of the increase in dependents, evidence of the current home’s size and failure to meet your family’s needs, and at least 25% equity (or you paying down the mortgage to where you'd have 25% equity) would be required - with the 25% equity you'd also be able to rent out your current home and use the rental income to help offset your current mortgage's payments as well.

The question is... do you have the 25% equity?

With 3% down & conventional financing you'll need a middle credit score of at least a 680 that I know of and a 720 score with most lenders.
0 votes
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