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Check Out the Ultimate List of Home Loans if You have a 600 Credit Score

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Applying for a mortgage sounds like the most hassling part of the homebuying process.

You have to get your credit report, find out your credit score, and then you need to pass all of these documents to lenders. And that’s only after you already have an idea whether you have a shot at getting approved.

Knowing if you are eligible for a home loan is essential before you even apply. Why? Because whether or not you do get approved, your score loses a couple of points. So if you do get rejected, this might mean an even lesser chance of finding a suitable lender for your home loan.

It’s a good thing you are now reading this article!

Here, we’re going to make sure you know whether you have the right qualifications for particular loans. For example, we will share which mortgages will accept borrowers with a minimum credit score of 600.

What you do not qualify for

Honestly, a 600 credit score is not a great score. You really could use a lot more points.

At this level, you will be able to pass the basic requirements of many mortgage types, but this does not mean that it will make hunting for a lender that much easier. This is due to overlays. Since lenders are still the ones handing the money to borrowers, they still have the right to include further requirements. For example, the government may prescribe a particular credit score, but the lender can quote another.

Since there is only one type of mortgage that you really won’t be able to qualify for at this point, let’s talk about this one first, in case it encourages you to take more time on this decision.

Conventional Loans

Before all of the government-backed loans came into the picture, traditional loans were the norm. Today, these traditional mortgages are better known as conventional loans.

The basic idea is to borrow the funds from a private lender when you don’t have money to pay for a house purchase upfront. If you stop paying back your loan, you give up ownership of this home. The lender gets this house and sells it to recoup their loss.

The thing is, we’re still talking about a lot of money here that you have to ask from a lender. The riskier the borrower, the harder it is to convince a lender to let you take on a loan.

Enter government-backed loans. These mortgages exist to provide more opportunities to Americans and make lenders feel more secure when lending a lot of money. If the borrower defaults, the government pays back the lender a specific guarantee. As a result, the investment becomes less risky for the lender, and more borrowers are approved.

Conventional loans do not have the backing of any government agency. That being the case, traditional mortgage lenders do not have the same confidence in lending out considerable sums of money since they will only be relying on your home’s value if they need to recoup their loss. For this reason, they usually ask for a higher credit score, one that starts at 620.

At a 600 credit score, you won’t be able to qualify for a conventional loan. But we suggest you try your luck raising your credit so you can do so even in just a few months.

When you get a conventional loan, you have to pay for private mortgage insurance (PMI). It ensures the lender in case of a foreclosure, but unlike government-backed loans, you have the chance to forgo PMI altogether. To do this, you have to make sure that you can pay at least a 20% down payment based on your home’s purchase price. If you can’t, you pay PMI until you reach 22% home equity.

Despite the possibility of avoiding it, having to pay for PMI is frustrating. But there are still borrowers who will find conventional loans a better fit for their needs if they want to buy a house anywhere in the U.S. for any purpose they want. In addition, if you get a conventional loan, you are not obligated to live in this house for at least a full year.

Since you don’t need to use a conventional loan for a primary residence, this also means that you can have as many traditional loans as you can afford.

Of course, the best home loan is still the one that caters to all your needs. While conventional loans can have many perks that government-backed loans do not offer, see if you might prefer these other options we’ll discuss in the next section.

Home Loans 600 Credit Score

If we categorize a 600 credit score, it falls under the low credit score range. However, good FICO Scores start at 670, so there’s still a long way you need to go from here.

There are two general kinds of mortgages you can qualify for with 600 credit. These are government-backed loans, which are mortgages insured by specific federal departments, and there are these loans are increasingly getting famous for called Non-QM loans.

Government-Backed Loans

1 – FHA Loan

When they can’t qualify for a conventional loan, the usual alternative for Americans is FHA loans. This is because FHA loans offer the most accessible qualifications.

You see, the FHA loan was set up back in 1934 when the Federal Housing Administration was formed. It was created with the supreme purpose of ensuring that the housing market stays strong. If more people can afford home purchases, the real estate market remains healthy, and the economy also follows.

Since it is a government loan, you are obliged to use this house for at least one year before you start using it for other ends. So the FHA loan is better for families with lower incomes and assets than those with more buying power who might want to invest in the real estate market.

Ideally, the minimum credit score to qualify for an FHA loan is just 500. But lenders who are willing to accept borrowers with this level of credit are getting harder to find. If your credit score starts at 500, you also need to have at least 10% of the home’s purchase price in the bank for a down payment. This is aside from closing costs. There is also a 1.75% you need to prepare for the upfront mortgage insurance (exclusive to FHA loans).

If you have a credit score of at least 580, on the other hand, you can choose to pay a 3.5% down payment. However, note that if you avoid putting down 10 percent, you have a monthly insurance fee that will stay on for the whole time you are repaying your loan. Therefore, it’s better to pay at least 10% to stop this monthly mortgage insurance after eleven years.

2 – USDA Loan

Next, we have the USDA loan, which the U.S. Department of Agriculture guarantees.

This is a more attractive option than the FHA loan because you can get 100% financing here. However, there are limited areas in the U.S. where this type of mortgage can be applied. Essentially, your home must be located in an area that is labeled rural by the USDA.

Another great thing about this is it’s not strict about credit scores. It doesn’t have credit score requirements if the borrower has a fair credit history proven through proper documentation. However, one big disqualifier that makes it hard for many borrowers to get approved is the household income limit.

Even if the loan is only under the name of one of the home’s occupants, the lender will look at the combined household income, which must not exceed 115% of the average median income in the state where this is being applied. There’s a lot of wiggle room here because 115% is a fair requirement, but this will not work in your favor if we’re talking about a big family that will be moving into the home.

Although the USDA ensures this loan, you also don’t have to turn your real estate into a commercial property. You don’t have to convert your land into a farm, and you don’t have to take up farming yourself. As in other government loans, you are only allowed to use this home for primary residence purposes.

3 – VA Loan

The last government-backed loan on our list is also the most exclusive. This is the VA loan offered through the Department of Veterans Affairs.

As you might surmise, this is meant for our service members, veterans, and their qualified spouses. To help our American brothers and sisters who serve and protect our nation, the VA makes it easier to qualify for a mortgage, especially if they might have bad credit or no funds for a down payment.

The VA loan does not have minimum credit score requirements and does not ask for a minimum down payment like the USDA loan. If you remember, for conventional loans, you can only escape having to pay for PMI once you lock in 20% home equity. The VA can convince more lenders to approve eligible borrowers by guaranteeing 25% of the loan outright for VA loans. Because this gives the mortgage lender more confidence in the borrower, no mortgage insurance is required, and they can provide more competitive mortgage rates.

However, to keep the program going, the Department charges a VA funding fee, and this amount depends on your entitlement or if you’ve already used the VA loan previously.

Non-QM Loans

Finally, it’s time to discuss Non-QM loans.

If you are thinking, why Non-QM? This should mean that there is a QM loan. And you are correct.

The Q in QM stands for qualified, as in Qualified Mortgages. When we say qualified, this refers to mortgages that satisfy the Dodd-Frank Wall Street Reform and Consumer Protection Act which was passed after the last Financial Crisis. In particular, mortgage lenders have to ensure that borrowers show a reasonable ability to repay the loan. So you have a credit score, a debt-to-income ratio, and documented proof of employment.

In the absence of any of these requirements, you can apply for a Non-QM loan, which stands for Non-Qualified Mortgage. Here, you have to look for a lender who’s willing to prove your ability to repay more unconventionally. It can sometimes be easier to qualify for this loan because showing how much money you have in the bank can be enough.

That said, note that when you get this type of loan, there is a much higher interest rate, and you might have to make an even larger down payment. In addition, the legal protections that other types of loans usually have may also not apply if you run into problems with a Non-QM loan.


Applying for a mortgage with a 600 credit score will have its challenges, but it’s possible to buy a house at this point in your life. Depending on your background, you may be eligible for a USDA loan or a VA loan. If you qualify for neither, you can always apply for an FHA loan.

Now, even if you have a 600 credit score and satisfy the credit score requirements of these government-backed loans, you might still have hiccups with your debt-to-income ratio or your employment stability, which are very important to these mortgages. In which case, you can look in the direction of Non-QM loans instead.

We will always highly recommend, though, that you work on improving your credit. If you can work your way up to even just a credit score of 620, you can already gain a chance at applying for a conventional loan which will offer you more savings down the road.


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