Can I Get Approved for a Mortgage With a 600 Credit Score?

It is often possible to obtain a mortgage with a 600 credit score, though it can present more challenges than for applicants with higher scores. Lenders evaluate various factors beyond the credit score to determine eligibility and loan terms. Understanding available mortgage programs and preparing your financial information thoroughly can significantly improve your chances of approval.

Mortgage Programs for Lower Credit Scores

Several mortgage programs are designed to assist borrowers with lower credit scores, primarily backed by government entities. These options offer more flexible eligibility criteria than conventional loans.

Federal Housing Administration (FHA) loans are a common choice for individuals with credit scores around 600. A credit score of 580 typically allows for a down payment as low as 3.5% of the home’s purchase price. Borrowers with credit scores between 500 and 579 may still qualify but generally need a larger down payment, often around 10%. FHA loans require both an Upfront Mortgage Insurance Premium (UFMIP), which is 1.75% of the loan amount and can be financed, and an annual Mortgage Insurance Premium (MIP) paid monthly.

VA loans offer benefits for eligible veterans, active-duty service members, and some surviving spouses. These loans often require no down payment and typically do not have a minimum credit score requirement set by the Department of Veterans Affairs. Most private lenders, however, usually impose their own minimum credit score, often ranging from 620 to 670, though some may accept lower scores with additional scrutiny.

USDA loans are another government-backed option for properties in eligible rural and some suburban areas. These loans often feature no down payment and flexible credit requirements. While the USDA does not set a minimum credit score, many lenders typically look for a score of at least 620 to 640 for streamlined approval through their automated underwriting system. If a borrower’s score is below this threshold, manual underwriting may be possible if other financial factors are strong. USDA loans also have income limits, generally set at 115% of the area’s median income, which vary by location and household size.

Lender Considerations Beyond Credit Score

Lenders consider several factors beyond a credit score to assess a borrower’s ability to repay a mortgage. These additional considerations are especially important for those with lower credit scores, as they can serve as compensating factors.

One primary factor is the debt-to-income (DTI) ratio, which compares your total monthly debt payments to your gross monthly income. Lenders use DTI to determine if you can comfortably manage new mortgage payments. While many conventional lenders prefer a DTI of 36% or less, government-backed loans like FHA and VA loans can be more flexible, sometimes allowing ratios up to 43% or even 50% depending on other compensating factors.

Lenders also scrutinize income stability and employment history. They generally seek evidence of consistent income, often requiring a two-year history in the same job or field. For self-employed individuals, lenders typically require two years of business tax returns to assess income stability.

Beyond income, lenders assess a borrower’s assets, including funds available for a down payment and closing costs, as well as reserves. Even for programs with low or no down payment, funds are needed for closing costs, which can range from 2% to 5% of the loan amount. Lenders verify the source and sufficiency of these funds through bank and investment statements. The type and condition of the property itself also influence approval, as the home must meet specific appraisal standards for the loan program.

Documents and Information for Your Application

Gathering the necessary documents beforehand streamlines the mortgage application process, especially when a credit score requires additional scrutiny. This provides lenders with a full picture of your financial standing.

Personal identification documents include a valid driver’s license or state ID and your Social Security card. Lenders use these to verify identity and pull credit reports.

For income verification, you will typically need W-2 forms from the past two years and recent pay stubs covering 30 days. If you are self-employed or have complex income sources, federal tax returns for the past two years are generally required, along with authorization for the lender to request tax transcripts directly from the IRS. Lenders look for consistent income patterns and may average income over 24 months, particularly for variable income such as bonuses or commissions.

Asset verification requires bank statements for the most recent two to three months from all checking, savings, and investment accounts. These statements confirm you have sufficient funds for a down payment, closing costs, and financial reserves. Lenders will also examine any large or unusual deposits on these statements, often requiring an explanation of their source. Information on other debts, such as statements for existing loans (auto, student, personal) and credit cards, is also necessary to calculate your debt-to-income ratio.

Navigating the Mortgage Application

The mortgage application process follows a sequence of steps, beginning after you have prepared your financial documentation. This understanding can help ensure a smoother experience.

The first step often involves obtaining a pre-approval, which is an initial assessment by a lender of how much you might be able to borrow. This step requires submitting your prepared financial documents for a preliminary review of your credit, income, and assets. A pre-approval letter demonstrates to sellers that you are a serious and qualified buyer.

Once you find a suitable property and your offer is accepted, you will proceed with the formal mortgage application. This involves submitting the complete package of verified documents to your chosen lender. The lender then initiates the underwriting process, where a mortgage underwriter thoroughly reviews all financial data, credit history, and property details to assess the risk and determine final loan approval.

During underwriting, an appraisal of the property is ordered to confirm its market value, ensuring it supports the loan amount. A home inspection, while often recommended, is typically a separate process initiated by the buyer to identify any potential issues with the property’s condition. The final stage is closing, where all legal documents are signed, funds are transferred, and property ownership is officially transferred to the buyer.