I haven’t personally tried to get a mortgage with a 650 credit score, so I had to do a lot of research to be able to answer this question. I first spent some time in some loan officer forums and they confirmed what I suspected. It’s possible to get some types of loans with credit in this range. Other types are outside the realm of possibility. I don’t put a huge amount of trust in what people say online so I decided to get a better answer by asking the mortgage broker (Glen) who helped me when I bought my house, earlier this year.
When I asked Glen if getting a mortgage was possible with 650 credit, this was his response, “Yes, pricing is a little worse than 750 credit, but 650 is doable.”
From my follow-up with Glen, here’s what I learned about the situation:
Conventional Loans Don’t Fly with a Credit Score of 650
Apparently, it’s really hard to get insurance for loans if the credit score is below 680. Because of that, it isn’t possible most of the time to get a conventional mortgage if you’re at 650. Most lenders want to see 680 or higher. I found a few lenders who will take as low as 660 but that still doesn’t cover you if you’re at 650.
FHA Loans are the Better Option
With FHA loans, you can get financing all the way down to 580 credit, as long as certain criteria are met. Here’s a quote I found from another mortgage broker, “I am a mortgage broker, you can absotuely get a mortgage with a 650 mid score. As a mater of fact you can go as low as 581 for an FHA mortgage.”
In order to get this type of mortgage, you will have to meet some requirements:
- The purchase price needs to be under the limit set for your city and state. You can find your limit amount here.
- You also need to have a debt-to-income ratio that meets the requirements.
You will also have to have the following ready before you get your loan:
- Address to your place of residence (past two years)
- Social Security numbers
- Names and location of your employers (past two years)
- Gross monthly salary at your current job(s)
- Pertinent information for all checking and savings accounts
- Pertinent information for all open loans
- Complete information for other real estate you own
- Approximate value of all personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms (past two years)
- Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals
Well the good news is this, you can definitely buy a house with a 650 credit score – even if you can’t pay cash. You just have to do the work, gather the documents, and go for it. Let me know if you have any questions and hopefully you’ve enjoyed this lesson from the Dr.!