Will a 605 score get me approved for 80,000 home loan?

Asked by Jarrod, Ohio Wed May 25, 2011

Just a few particulars of my situation: credit score of 605, just paid off 4 of the 5 delinquents on my report. Just paid off my auto and college loans and have 2 credit cards with a 0 balance and $500 limits on both. I've had the same job for 12 yrs. I currently have no money to put down but am saving. I have no debt to speak of. Would I get approved for an $80,000 fha loan and if not, what would it take and how long would it take to get there? Thanks for any help.

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Jessica Bate…, Agent, Beverly Hills, CA
Thu Dec 12, 2013
You can get an FHA loan with under a 600 middle score with some lending institutions but not many. I would recommend finding a broker or service to help you locate a reputable lender like, The Lenders Network. If anyone can find you a loan they can!
2 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Mon Jul 15, 2013
Good afternoon Jarrod,

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!
2 votes
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Mon May 15, 2017
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0 votes
Christinapro…, Home Buyer, New York, NY
Tue Jul 21, 2015
I have a credit score of 530 can I get a loan
0 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Wed May 25, 2011
What you may or may not want to hear, is that when you pay off older delinquent credit (such as charge-offs, collections) it actually updates the date of last activity on the account, and when the scoring system takes that into consideration it makes it look as if it was a fresh delinquency instead of an older one, and so scores can actually decrease (I'd say a good portion of the time). Now if you paid these items and they were removed from your credit report (not just a $0 balance, but removed), then that should definitely increase your scores.
The good thing is an underwriter will not consider them just having happened, because they can use common sense and see they were older items that just were paid. So really it's just your scores that could potentially be negatively impacted.

Just for your general info, most lenders these days are looking for 600-640 scores for most types of financing. Your score being a 605 before those items were updated, may or may not take you in the right direction, so as soon as it's been 30 days past since the last item you took care of - everything should reflect on your credit report and then I'd recommend you check your scores at myFICO.com to see where they are at.

$1,400/mo would be about where your income needs to be for an $80k home in Ohio or Illinois (assuming property taxes are $1,600/year, insurance of $600/year) - payment should come in just under $600/mo. You qualify with your gross income FYI, not sure if $1,400/mo was net or gross.
0 votes
Jarrod, Home Buyer, Ohio
Wed May 25, 2011
The 605 score does not reflect my recent pay offs. They were mostly old medical bills and a cell phone bill. Nothing from the last 2 yrs. I make $1400 a month
0 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Wed May 25, 2011
Is the 605 score the updated score after all of the items you did updated on your credit report?

What were the delinquent items that you paid, and when were they from? Any of them happen within the past 12-24 months?

How many open trade lines (guess it'd just be credit cards since you have no debt) do you have on your credit right now? Sounds you have at least the 2 credit cards. Anything else?

Your income will also play a factor into what you can qualify for. Do you make salary? How much is your income?

Not sure if you are looking in Ohio or Bureau County, IL, but both areas have a lot of homes that are eligible for USDA financing which is 100%/no down payment/no monthly mortgage insurance. There are also various first time homebuyer down payment assistance programs in Illinois and Ohio as well, in case you do want to qualify for a program with FHA financing (or another program). However due to USDA's low rates (in the mid 4's), 100% financing, and no mortgage insurance... it is a very hard loan program to beat. The catch is you need to buy in an eligible area, and you can't make too much income.

You can check eligible areas and your areas income limits at http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

The answers to the questions will be needed for specific feedback on your situation though, I understand if you do not want to answer them here, but whoever you get financing with will need to know that information.
0 votes
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