Can You Get a Mortgage with a 581 Credit Score?
Many prospective home buyers assume that your credit must be in the 600’s or 700’s to get a mortgage. This is certainly not the case, as many mortgage lenders will provide home loans to borrowers with credit scores as low as a 500.
FHA Loan with 581 Credit Score
The most common type of loan available to borrowers with a 581 credit score is an FHA loan. FHA loans only require that you have a 580 credit score, so with a 581 FICO, you will definitely meet the credit score requirements.
Other FHA loan requirements are that you have at least 2 years of employment, which you will be required to provide 2 years of tax returns, and your 2 most recent pay stubs. The maximum debt-to-income ratio is 43% (unless you have satisfactory “compensating factors”, such as a higher down payment, or cash reserves).
Something that attracts many borrowers to FHA loans is that the down payment requirement is only 3.5%, and this money can be borrowed, gifted, or provided through a down payment assistance program.
USDA Loan with 581 Credit Score
The minimum credit score requirements for USDA loans is now a 640 for an automated approval. Fortunately, you can still get approved for a USDA loan with a 581 credit score, but it will require a manual approval by an underwriter. In order to get approved with a 581 credit score, expect to have strong “compensating factors”, such as conservative use of credit, 2 months mortgage payments in cash reserves (savings), a low debt-to-income ratio, and/or long job history.
Other requirements for USDA loans are that you purchase a property in an eligible area. USDA loans are only available in rural areas, as well as on the outer areas of major cities. You can not get a USDA loan in cities or larger towns.
You also will need to show 2 years of consistent employment, and provide the necessary income documentation (2 years tax returns, and 2 recent pay stubs).
581 Credit Score Mortgage Lenders in 2019
Below is a list of some of the best mortgage lenders for borrowers that have a 581 credit score. All of the following lenders offer conventional and FHA loans, and can help you determine which loan will provide you with the best terms. You may contact these lenders directly, or use our lender matching service, which will help you find the best lender for your unique situation.
3.) Quicken Loans
4.) Supreme Lending
6.) US Bank
7.) Flagstar Bank
9.) Freedom Mortgage
10.) Loan Depot
The above mortgage lenders are just some of the best that offer loans to people with a 581 credit score. There are several more lenders that may offer you financing. If you would like to have a competitive quote for your home loan, request to use our free lender matching service.
Frequently Asked Questions
What if I have had a major credit issue in recent years?
If you have had a bankruptcy, foreclosure, or short sale, there are several non-prime lenders that offer options even just 1 day out of your credit event. Expect to be required to put a much higher down payment down if you are within 2 years of most major credit events, such as those listed above.
Are there other credit requirements that I should know about?
Most mortgage lenders require that you have 3 trade-lines on your credit report. This can be auto loans, credit cards, personal loans, or other qualifying lines of credit. There can be exceptions to this rule, including alternative bills that are often allowed (phone bills, utilities, etc.).
What are the interest rates for a borrower with a 581 credit score?
The interest rate will depend on your individual qualifications, the mortgage lender, and the date you lock your interest rate. We can help you receive a free rate quote from a mortgage lender.
Is down payment assistance available to someone with a low credit score?
Yes, in fact many down payment assistance programs are available to people with low credit scores. The types of programs range from local (city, county, or state level), or nationwide programs. We can help you see if you qualify for down payment assistance. If you have lower income, you are even more likely to qualify, as most programs are geared for lower income households.