Every lender will have different guidelines pertaining to minimum credit scores and I can only speak for the ones I work with. As long as you have a 550 FICO (credit score) you meet the eligibility guidelines granted a 10% down payment would be required. In order to take advantage of the 3.5% down payment option, a minimum 580 FICO would be required. I do work with a few lenders who do not have credit score requirements, however, these are last resort options as they typically require larger down payments. We need to evaluate your scenario from all angles to best determine which route makes most sense from a financial standpoint.
It's also important to note that your score is equally as important as the content within your credit report. This is where an experienced mortgage professional, such as myself, is most important. When scores are low it generally means one or more are impacting your credit profile negatively: high credit utilization in comparison to available credit, late payments, collections, judgments, or other derogatory marks. There is nothing I haven't seen before being that I review credit reports on a daily basis. It's simply a matter of proactively understanding how an underwriter will look at your report (when the time comes) and making sure all potential questions they may have are addressed ahead of time.
As you can see there are many aspects of obtaining mortgage financing, especially when there's concern regarding credit. It's best that we speak and go over all other facets of the home purchase process so we can weigh-out all feasible options. Please contact me at your earliest convenience, I may be reached directly at (201) 957-6768 or via email; whichever is easiest for you.
Paul F. Marzolla
Sr. Mortgage Consultant