Mortgages For Borrowers With Under 580 Credit Scores

ByMichael Gracz


This Article Is About On Mortgages For Borrowers With Under 580 Credit Scores

Many clients of Gustan Cho Associates have credit score is well below 580. Since we do not have any LENDER OVERLAYS, we are able to help these clients. We have many loan options for individuals with troubled credit. Just because your credit score is below 580 does not disqualify you from buying a house. Even further, just because your credit score is above 580, but that does not guarantee you qualify for a mortgage. The lender must verify much more than just your credit score. In this blog we will detail how to get a mortgage with credit score is below 580 and what it takes Mortgages For Borrowers With Under 580 Credit Scores get approved for a home loan. As stated above, we have more than one option for our clients with credit scores below 580. Below we will detail a few different loan options we have available.

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HUD Mortgage Lending Guidelines

HUD Mortgage Lending Guidelines

FHA Loans And HUD Mortgage Guidelines:

  • The U.S. Department of Housing and Urban Development (HUD) allows Americans to buy a house with credit scores below 580
  • The caveat to these mortgages is they require at least a 10% down payment
  • An FHA borrower with a credit score above 580 is only required to put down 3.5% as a down payment
  • But let’s focus on the credit score is below 580
  • The FHA TOTAL SCORECARD, the automated underwriting system (AUS) for FHA loans does allow automated approvals below 580 or you can manually underwrite the file
  • Since we close and fund so many mortgages with credit score is below 580, we have seen multiple different situations
  • The automated underwriting system seems to loosen up when putting down 10% or more on an FHA mortgage

I have seen automated approvals with late payments in the past 12 months even combined with credit score is below 580. When putting down 10%, the level of risk dramatically decreases for lenders.

Manual Underwriting Guidelines On VA And FHA Loans

Manual underwriting:

  • If for some reason you do not get an automated approval with 10% down, your loan may be downgraded to a manual underwrite
  • There are specific rules put in place for debt to income requirements when you manually underwrite an FHA mortgage
  • Your debt to income is capped at 31% / 43% with credit scores below 580
  • There is no exception, even with COMPENSATING FACTORS

For more on FHA manual underwriting guidelines please see our FHA MANUAL UNDERWRITING BLOG.

Mortgages For Borrowers With Under 580 Credit Scores: Non-Occupant Co-Borrower Mortgage Guidelines

If you do not qualify by yourself or with your spouse, you may add a non-occupant co-borrower to a mortgage.

  • For an FHA mortgage, you are permitted to add a co-borrower who will not live in the property
  • Hence the term non-occupant co-borrower
  • Their qualifications will be added to the loan file
  • All of their debts and income will count against the overall debt-income ratio of the loan
  • Since they will be on the loan, if they are helping you with the down payment, that will not be considered to give funds
  • When utilizing your own funds, the risk is slightly lower compared to using gift funds
  • The use of your own funds will increase your chances of approval
  • Too many Americans receive incorrect information based on their online research when it comes to mortgage guidelines

We encourage you to call Gustan Cho Associates directly for clarification. You can contact us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

VA Mortgage Guidelines For VA Home Loans

VA Mortgage Guidelines For VA Home Loans

VA Mortgage Lending Guidelines:

  • We are experts in VA mortgage financing
  • Since we do not have a lender overlays to get in the way for our clients, we do not have a minimum credit score requirement for VA mortgages
  • Most information you read online will tell you to need a 620 credit score to apply for a VA mortgage
  • Keep in mind this is not a guideline, that is an overlay. If your credit score is below 580, please reach out to us for a VA mortgage
  • We have many success stories of qualifying are brave veterans with low credit scores
  • Per HUD guidelines, VA mortgages do not have a minimum qualifying credit score
  • They are more interested in your credit history
  • They want to make sure you have at least a 12-month history of paying all your bills on time

As long as you do not have late payments or any non-medical collections in the past 12 months, more often than not, you qualify for a VA mortgage.

Qualifying For Mortgages For Borrowers With Under 580 Credit Scores With Non-QM Loans

NON-QM Lending Guidelines:

  • The trend of NON-QM mortgages has increased dramatically over the past few years. We have seen an increased need for portfolio lending
  • These loan products are designed for clients who do not fit in your everyday Conventional, FHA, and VA mortgages
  • NON-QM lenders set their own guidelines because they are lending their own money
  • The minimum qualifying credit score for a NON-QM mortgage is usually 500, but we have seen exceptions below that
  • When your credit scores are below 580, you will need a minimum of a 20% down payment
  • Or 80% loan to value for a refinance

NON-QM opens the door to homeownership to thousands of Americans! See our blog on NON-QM MORTGAGE PRODUCTS for more information.

Mortgages For Borrowers With Under 580 Credit Scores Can Qualify At Gustan Cho Associates

75% of our clients have either been denied at their current lender or not getting the customer service they need.

  • We are experts in all aspects of mortgage financing
  • We are currently licensed in multiple states and growing rapidly
  • We work with many families for as long as 12 months before they qualify for the home they would like to buy
  • If you do not qualify today, we will create a financial plan to help you qualify as soon as possible
  • If 10% down payment is out of reach, we will work with you to get your credit score is above 580
  • Repairing credit can take time, be leery of credit repair companies promising you the world
  • The credit bureau does not update quickly, so instant gratification is not possible
  • Building credit takes work and time

We have seen every credit profile Under the Sun and are here to offer guidance.

Mortgages For Borrowers With Under 580 Credit Scores: Choosing A Lender With No Overlays

Mortgages For Borrowers With Under 580 Credit Scores: Choosing A Lender With No Overlays

Borrowers who need to qualify for a mortgage with a mortgage company licensed in multiple states with no lender overlays, Please reach out to Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates has a national reputation of being a one-stop shop. This is due to not just not having lender overlays on government and conventional loans, but being partnered up with over dozens of non-QM and alternative financing mortgage wholesale lending partners. There is not a non-QM home mortgage program Gustan Cho Associates does not have. Some of our most popular mortgage programs are non-QM mortgages one day out of foreclosure, bank statement mortgages, asset-depletion loans, fix and flip loans for rehabbers, and P and L stated income loan programs. Gustan Cho Associates is the go to lender for owner-occupant, second homes, and investment property financing.