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Credit Requirements to Buy a Home in 2021

Does a 580 credit score qualify for a mortgage? Technically, yes it does, but it only credit qualifies for an FHA loan which is backed by the Department of Housing and Urban Development. Effective October 4, 2010, the minimum qualifying credit score for an FHA-insured mortgage loan with a 3.5% down payment is a 580 FICO score. Learn more about qualifying FICO scores in an earlier article.

While HUD may only require a 580 FICO score to qualify for a low-down payment mortgage, that does not mean that every lender has the same requirements. Every mortgage company has their own set of guidelines called “overlays” that are imposed in addition to the guidelines set by Fannie Mae, Freddie Mac, HUD, USDA, and VA. Why do lenders impose these extra overlays? It is essentially to avoid buybacks and to avoid ruining relationships with partners that companies sell loans to.

Here at CrossCountry Mortgage, we do not have those overlays and borrowers with a 580 qualifying FICO score can credit qualify for a low-down payment mortgage. However, just because the borrower may credit qualify with a 580 FICO score that does not necessarily mean that they qualify for a home loan.

The following is not a complete list but here are some of the basic requirements for qualifying for a home loan:

  • Qualifying FICO Score of 580+
  • Two Year Employment History with Likelihood of Continuance (with no gaps)
  • Two Year History of Receipt for Any Non-Payroll Income Used to Qualify (with a 3 Year Likelihood of Continuance)
  • Two Year Residence History
  • No Derogatory Credit in the Last 12 Months (Excluding Medical Collections)
  • At Least 3 Open and Active Tradelines
  • Sufficient Assets for Closing
  • Sufficient Reserves (If Required)
  • Qualifying Debt to Income Ratios

For a complete list, contact me. I am always available to discuss mortgage options specific to your needs and can connect you with credit experts to help you get where you need to be to qualify if you are not there yet.