Several mortgage loan options — including FHA loans and VA loans — are designed to help borrowers with low credit scores get a home loan.
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If you want to get a mortgage but your credit score needs work, you might think homeownership is out of reach. But you don’t need perfect credit to get a home loan. It’s possible to get a mortgage with a 600 credit score.
Buying a home is an exciting milestone in life. However, the process can be daunting, especially when your credit score is less than ideal. A credit score of 600 falls in the fair range, which can make getting approved for a mortgage challenging. But having a 600 credit score doesn’t necessarily mean you can’t get a home loan. Here’s what you need to know about getting a mortgage with a 600 credit score.
What Credit Score Do Lenders Want For A Mortgage?
Most lenders prefer borrowers to have a good to excellent credit score to qualify for a conventional mortgage. Here are some typical credit score requirements:
- Excellent credit: 760+
- Good credit: 670-759
- Fair credit: 580-669
- Poor credit: 579 or below
So with a score of 600 you fall into the fair credit range which is below what most lenders want to see for a conventional loan.
Can I Get A Mortgage With A 600 Credit Score?
The good news is yes you can get approved for a mortgage with a 600 credit score through alternative lending programs like FHA USDA, and VA loans. These government-backed loans offer more flexible credit requirements for borrowers who may not qualify for conventional financing.
Here are some options to consider with a 600 credit score
FHA loans – Require a minimum 580 score with 3.5% down payment. Popular choice for borrowers with fair credit.
VA loans – No minimum score but lenders prefer 620+. For eligible veterans and service members.
USDA loans – Typically want 640+ but will consider all factors. For rural properties.
While you can get approved with a 600 credit score, it’s wise to improve your score if possible before applying since you’ll pay less interest with a higher score. But if buying now is your priority, FHA loans are your best bet.
How Does Credit Score Affect Mortgage Rates and Costs?
Your credit score significantly impacts the mortgage terms and interest rate a lender will offer you. The higher your score, the better deal you can qualify for.
With a 600 credit score, you can expect:
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Higher interest rate – Lenders view you as a higher risk borrower, so you’ll pay a higher rate versus someone with excellent credit. The lower your score, the higher your rate.
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Mortgage insurance – FHA loans require upfront and annual mortgage insurance, adding to costs. Conventional loans require PMI if less than 20% down.
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Larger down payment – May need 10% or more down with poor credit versus 3% for excellent scores. This increases your upfront costs.
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Prepayment penalties – Some lenders may require these fees if you pay off the loan early. Read the fine print.
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Higher origination fees – Lenders may charge higher upfront loan costs due to the added risk. Shop around for best deals.
The difference of even 1% on your interest rate can add over $100/month in payments on a $300,000 home loan. So improving your credit first can yield big mortgage savings.
How To Raise Your Credit Score Before Applying
If time is on your side, boosting your credit score before applying for a mortgage can really pay off. Here are some tips:
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Pay all bills on time – Payment history is a big factor in your score. Set up autopay or reminders to avoid missed payments.
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Pay down balances – Lower credit utilization by paying down cards and loans. Shot for 30% or less utilization.
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Avoid new inquiries – Hard inquiries from new credit applications can lower your score temporarily. Hold off on new credit until after you close.
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Review reports for errors – Dispute and correct any mistakes on your credit reports to maximize your score.
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Add positive information – Become an authorized user on someone else’s old credit card account to build positive payment history.
With diligent credit management, you can quickly boost your score 50-100 points or more. Shop lenders again before applying once your score improves.
Alternatives If You Can’t Improve Credit Quickly
For some borrowers, rapidly raising their credit score high enough for a conventional loan just isn’t feasible. If you need to buy right away, here are two options to discuss with a mortgage professional:
Portfolio lending – Local banks and credit unions may offer portfolio loans for credit scores in the 590-620 range. They hold these in their own portfolio instead of selling to Fannie/Freddie.
Non-prime lenders – Specialty lenders like loanDepot’s mello offer loans to borrowers with credit scores beginning in the 500s. Rates are higher but they get approvals.
The takeaway? While challenging, a mortgage is possible even with less-than-ideal credit. Consult reputable lenders to discuss your options and find the most competitive loan terms. With diligence and patience, you can achieve the dream of homeownership.
Mortgage loans for a 600 credit score
If you’re looking for a home loan with a 600 credit score, check out these programs:
FHA home loans are mortgages insured by the Federal Housing Administration. The government backing removes some of the risk for lenders, so people with lower credit scores and smaller down payments may qualify.
If you have a credit score of 580 or more, you’ll only need to put down 3.5% of the home’s purchase price, while a score of 500 to 579 requires at least 10% down.
You’ll have to pay two types of mortgage insurance with an FHA loan as well: an upfront premium and an ongoing fee — known as an annual mortgage insurance premium — that’s baked into your monthly payment. Depending on how big of a down payment you make, you’ll have to pay these mortgage insurance premiums for either 11 years or the life of the loan.
Backed by the U.S. Department of Veterans Affairs, VA loans are geared toward veterans, service members, and surviving spouses. You’ll pay no money down and no mortgage insurance, though you’ll be required to pay an upfront funding fee between 1.4% and 3.6% of the loan amount.
There’s no minimum credit score requirement for VA loans. The lender sets its own minimum, which means it’s possible to get this type of loan with a 600 credit score.
USDA home loans are no-money-down mortgages guaranteed by the U.S. Department of Agriculture. To get one, you’ll need to meet income requirements and buy a home in a USDA-designated rural area. Borrowers are also responsible for paying mortgage insurance in the form of an upfront guarantee fee and an annual fee.
Like VA loans, every lender sets its own credit score requirements. So it’s possible to get a USDA-backed mortgage with a 600 credit score, as long as you find a lender willing to work with you.
A non-qualified mortgage loan, also known as a non-QM loan, is a home loan that doesn’t satisfy the requirements to be a Qualified Mortgage. Non-QM loans are ideal for borrowers with fluctuating incomes — such as self-employed workers — and people who can’t meet stringent conventional loan requirements.
Non-qualified mortgages are usually offered by banks that set up and service their own unique mortgage programs, such as interest-only home loans. You can shop around for lenders that offer these loans or work with a mortgage broker who can make recommendations.
Can I buy a house with a 600 credit score?
A 600 credit score is high enough to get a home loan. In fact, there are several mortgage programs designed specifically to help people with lower credit scores. However, you’ll need to meet other lending requirements too. For instance, the lender will check your debt-to-income ratio (DTI), verify employment, and go over your credit history. You might have to make a down payment as well.
A lower credit score also means you’ll have higher borrowing costs because there’s more risk for the lender. These costs usually come in the form of mortgage insurance premiums and higher interest rates.
600 Credit Score Mortgage Options
FAQ
How much of a loan can you get with a 600 credit score?
Can I get approved for a house with a 600 credit score?
What is the lowest credit score to buy a house?
Is a 660 credit score good enough to buy a house?
Can you get a VA home loan with a 600 credit score?
VA home loans don’t have a minimum credit score requirement, so it’s possible to get this type of loan and buy a house with a 600 credit score. However, lenders are allowed to set their own minimums, which typically range between 580 and 660.
Can you buy a house with a 600 credit score?
Yes, you can qualify to buy a house with a 600 credit score. In fact, there are several loan programs specifically tailored to help people with lower credit scores. But this doesn’t mean everyone with a low score can qualify for a mortgage. You’ll have to meet other standards set by lenders, too. Verify your mortgage eligibility. Start here
Can you buy a house with a 620 credit score?
With a credit score above 600, your options open up even more. Conventional mortgages require only a 620 score to qualify. And with a credit score of 680 or higher, you could apply for just about any home loan. Verify your home loan eligibility. Start here In this article (Skip to) What is bad credit? Can I buy a house with bad credit?
Can a 600 credit score qualify for a mortgage?
To recap, a 600 credit score is high enough to qualify for a few different types of mortgages. But credit isn’t the only thing that matters. Before approving you to buy a house, a lender also needs to verify your employment status, income, and debt-to-income ratio to ensure you can make monthly payments on your mortgage.