Bad Credit Mortgage Loans

by : Staff


We are asked via email and phone all the time if there is such thing as a bad credit mortgage loan. An associated question,  is whether or not we know any bad credit mortgage lenders.

There are and we do are the short answers. The fact of the matter is that there are limitations of both, but they do exist. Currently, FHA loans, as they are government backed, have the most relaxed guidelines of any loan program that is available. FHA does however come with a minimum credit score requirement of 580 for the middle score. Sometimes here we can find ourselves in a bit of a semantic argument as to whether or not this constitutes a bad credit score. We have decided there really is not a great definition for bad credit, as each person may hold their own opinion. The person with a 740 credit score may see the 580 as being in the bad credit range, and the person with the 600 credit score may see the person with a 500 credit score as being in the poor category. The truth is always in the middle, but for this conversation the score needs to be 580.

Find out your credit score.

Though there are lenders that will lend below a 580 middle score, we don’t have any relationships with them. There are very few, and we have found that with lending, it is always best to try and get to a place where there is competition. Competition is good, it breeds good terms. Below 580 there is very little competition, and it is better (if you can) to put in a little more effort, a few more months of time to get your scores up a little higher before attempting to close on a new loan. It is tempting to be in a hurry, but you will likely attain a loan that is 15, 20 , or 30 years in duration, what is  a couple more months?

Like you, we see the ads online all the time that claim “Approval with scores as low as 500!”. Frankly, we don’t what these folks are doing that claim to be able to do these loan, but we are confident they are not doing home loans. Other than that we would only be guessing, so be cautious with these groups.