Can I Get a Mortgage with a 600 Credit Score?

Mar 11

When it comes to securing a mortgage or home loan, your credit score plays a significant role in determining whether you’ll be approved and what kind of terms you’ll receive. A credit score of 600 falls into the "fair" category, which might leave you wondering: Can I still get a mortgage with a 600 credit score? The answer is yes, but there are a few important things to consider. Let’s dive into the details.

Understanding Credit Scores and Mortgages

Credit scores generally range from 300 to 850, with higher scores indicating a stronger credit history. Here's a basic breakdown of what different credit score ranges mean for mortgage lenders:

Excellent (740 and above): You’ll likely qualify for the best interest rates and loan terms.
Good (700-739): You’ll generally be approved for a mortgage with competitive rates and terms.
Fair (600-699): This is where things get a little trickier. You may still be able to get a loan, but you could face higher interest rates or less favorable terms.
Poor (below 600): You may struggle to find a lender willing to offer you a mortgage, or you could be approved for a loan with very high-interest rates.

With a 600 credit score, you fall into the "fair" category. While it’s not the best score for securing a mortgage, it's still possible to get approved for a home loan—but there may be additional challenges.

Types of Mortgages You Can Consider with a 600 Credit Score

If your credit score is 600, there are a few loan options you can explore, but they might come with higher interest rates or stricter conditions.

1. FHA Loans

One of the best options for people with a 600 credit score is an FHA loan. FHA (Federal Housing Administration) loans are designed to help first-time homebuyers and those with less-than-perfect credit qualify for a mortgage.

Credit Score Requirement: The minimum credit score for an FHA loan is typically 580, which means a score of 600 could make you eligible.
Down Payment: FHA loans often require a down payment as low as 3.5%.
Other Requirements: Even though FHA loans are more lenient on credit scores, you will still need to demonstrate stable income, a manageable debt-to-income ratio (DTI), and the ability to make your mortgage payments.

2. Conventional Loans

Conventional loans, which are not backed by the government, typically require higher credit scores. With a 600 credit score, you may still be able to qualify for a conventional loan, but the conditions will likely be tougher.

Credit Score Requirement: The typical minimum credit score for a conventional loan is around 620, though some lenders may consider applicants with scores as low as 600. Keep in mind that with a score in this range, you’ll likely face higher interest rates and may be required to put down a larger down payment.
Private Mortgage Insurance (PMI): If you’re approved for a conventional loan with a 600 credit score, you will almost certainly need to pay PMI (Private Mortgage Insurance) if your down payment is less than 20%.

3. VA Loans (Veterans Affairs Loans)

If you are a veteran, active-duty service member, or a qualifying spouse, you may be eligible for a VA loan. VA loans typically don’t have a minimum credit score requirement, and they offer significant benefits like no down payment and no PMI.

Credit Score Requirement: While the VA doesn’t set a minimum credit score, most lenders prefer a score of 620 or higher. However, some may accept a 600 score, depending on other factors in your application.
Other Benefits: VA loans often have lower interest rates than conventional loans and do not require PMI, making them a highly attractive option for eligible borrowers.

4. Subprime Loans

If you don’t qualify for the more traditional loan options, subprime loans may be available. These are designed for borrowers with low credit scores, but they come with higher interest rates and stricter terms.

Interest Rates: Subprime loans typically carry higher interest rates to compensate lenders for the increased risk.
Risk: While subprime loans may be an option, they can be risky. With higher interest rates, you may end up paying significantly more over the life of the loan.

What Else Do Lenders Consider with a 600 Credit Score?

While a 600 credit score is one of the main factors lenders look at, it’s not the only one. Lenders will also evaluate other parts of your financial situation, including:

Down Payment: The larger your down payment, the less risk the lender faces, and the more likely they are to approve you for a loan. A larger down payment can also help offset a lower credit score.
Debt-to-Income Ratio (DTI): Lenders want to know that you can comfortably afford your mortgage payments. A lower DTI ratio (the percentage of your income that goes toward debt payments) makes you a more attractive borrower.
Employment History and Income Stability: Lenders like to see a steady income and a stable job history, ideally for at least two years. This assures them that you’ll be able to make your mortgage payments on time.
Other Assets: Having additional assets, such as savings or investments, can help improve your chances of getting approved.

How to Improve Your Chances with a 600 Credit Score

If you have a 600 credit score and are concerned about qualifying for a mortgage, here are a few tips to increase your chances:

Save for a Larger Down Payment: The more you can put down upfront, the less risk the lender takes on, which can increase your chances of getting approved.
Consider a Co-Signer: If possible, consider asking a family member or friend with a higher credit score to co-sign your loan, as this can help secure a better interest rate and terms.
Work on Improving Your Credit Score: If you have some time before you plan to apply for a mortgage, work on boosting your credit score by paying down existing debt, making timely payments, and reviewing your credit report for errors.

Yes, it’s possible to get a mortgage with a 600 credit score, but it may come with higher interest rates, less favorable terms, and stricter requirements. FHA loans, VA loans, and even some conventional loans may be options, depending on your circumstances. It’s essential to understand your loan options, be prepared to make a larger down payment, and consider working with a lender who specializes in helping people with less-than-perfect credit.

If you’re unsure about the best course of action, consulting with a mortgage broker can help you navigate the process and find the best mortgage solution for your financial situation.

Lindsey Woodard