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Credit score 540 need home loan.

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Credit score 540 need home loan.

My story the short version.


 Credit is not so great, living in a moblie home and the new owner wants to hit me with almost 150$ in new fines every month, unless I agree to this new contract. If i sign the contract i'm stuck here for a year, if I end the contract early I can be sued for the months I would not be living here. My current payments are right at 650$ a month, Been here 2 years I'm current on all payments. I need to move out asap!! I have found a home sale price is 67,000$ I have 10,000$ cash to put down on this home, my payments would need to be around 700$. My credit history is all medical, I have 4 years of credit history 1 late payment in the last 3 years. Current on my auto 2nd auto loan(9k owed), CC is current. Wife is in the same boat as I with her credit history but her score is alittle better then mine. So my question, is there a snow balls chance in hell we can find a mortage loan?

Message 1 of 19
Frequent Contributor

Re: Credit score 540 need home loan.

+with a score that low probably not

Message 2 of 19
Valued Contributor

Re: Credit score 540 need home loan.

It'll be helpful to answer these questions, especially income level despite your $10,000 downpayment available:


The 540 credit score and assuming the mortgage FICO reflects similar levels is a cause for concern. You may want to work on improving it and relocate to somewhere else if you really do not want to be locked into where you are at addtiional fees. Most likely you'd not qualify for a loan, so your next best option is to move to someplace else, and work on bringing up the FICO score by making your accounts current, etc. This is a marathon, not a sprint. It'll take time, but doable if you make the right moves to bring the score up and present a stable income stream to warrant a loan that is repayable.

Message 3 of 19
New Member

Re: Credit score 540 need home loan.

  1. Credit.  What are your credit scores and if you have any, what negatives (collections, charge-offs, late payments, BK's, judgments, tax liens, back owed child support, etc.) are on are credit and if they are owing or not.  When were the negatives, this is important, month/year is preferred, such as 3/07.  For BK's the Ch, filing & discharge date.  Even if credit isn't less than perfect, if you only have credit for a short period of time (<24 months), authorized user accounts (which aren't considered by underwriting), accounts from your father with the same exact name because you are a Jr., etc. that is important information to know too.
  1. Income.  Gross income is what is important when qualifying, not net income.  For self-employed/1099'd people it's your gross income minus expenses/write-offs, adding back in depreciation/depletion.  I know this is pretty sensitive for some people to list their income, but remember this board is anonymous (for those of you who want to remain that way).  If you don't want to list your income, and just want to receive advice without addressing that part of qualifying (which is very major), just say you have enough income, no one will pass judgment, but realize the advice given might not be able to be complete.

Both my wife and I working, 1 year on job for me, 2 years on job for her 


  1. Source of income.  Where is the income coming from?  Employment, pension, social security, disability, foster care, VA benefits, rental income, lottery income, etc.  If it's from employment, is it salary, hourly, overtime, bonus, commission, etc.

She gets child support


  1. Monthly debt payments.  This goes hand in hand with income and the new mortgage payment to determine your debt to income (DTI) ratio.  Only items on credit is the general rule, but also items such as alimony, child support, union dues and some other work related expenses are included too.  Only the minimum required payment amount is what underwriters are concerned with.  Items such as utilities, cell phone, insurance, etc. are not included in the DTI.  If you have a question if something is included just ask.

Credit card payment is 49$ a month. Has been on time and is up to date. Truck payment is 355$ a month on time and up to date.


  1. Employment (for those who are employed).  What type of employment such as self-employed, S-corp, W-2'd, 1099'd, part-time, full time, 2nd job, etc.  How long have you been on the job & how long have you been in the industry.  A 2 year employment history is what most loan programs require.  For those who have been self-employed less than 2 years, what did you do before your venture?  For those of you who have less than 2 years employment history, did you graduate from a higher education school before you started working?

Been working as an auto mechanic for 7 years on and off. Wife has been working in health care for 5+ years.


  1. Assets/Reserves.  This is to determine how much you could potentially have as a down payment and also as reserves to help qualify (for example if your debt to income ratio is high this could help qualify you anyway).  Savings, checking, 401k, IRA, stocks, bonds, CD's, mutual funds, money market accounts, gift, etc. all can qualify.  If it is a pension or retirement account that does not permit you to withdraw or take a loan against (other than for hardship), and is only able to be used after you quit or retire, then it cannot be used as reserves.

10,000$ cash down


  1. Location.  What state & county.  City or zip if you want but usually that is not needed.  This is to determine FHA loan limits, what special programs might be available for you, how much property taxes & homeowners insurance will likely be, amongst other items.

Home that we are looking to purchess is in Jefferson county, mo. 


  1. Property.  Is it a single family house, condo, townhome, 2-4 units, 5+ units, manufactured home, a co-op, condotel, the penthouse of a 45 story apartment building, suburban, rural, a lot of acres, a working farm, a gas station, etc.  Also the condition of the property is helpful, as lenders have certain minimum requirements properties must meet (working utilities, etc.).

Single family


  1. Value.  For a purchase transaction, what is the home price range you are looking in, narrowed it down to, or are under contract for... and for a refinance transaction what is the appraised value of the home and when did you purchase your home.

asking price is around 70,000$ it is valued at 130,000


  1. Occupancy.  Primary residence, vacation/2nd home, non-owner/rental property.

Primary Residence


  1. Transaction Type.  Is it a purchase, refinance just for better terms, refinance to take cash out, looking for a 2nd mortgage, a reverse mortgage, etc.


Message 4 of 19
New Member

Re: Credit score 540 need home loan.

Hope that is not to much of my personal info, I pulled the names and collection agents. dates and balances is all I left really.

Message 5 of 19
Frequent Contributor

Re: Credit score 540 need home loan.

I know this is kinda out there, but if it's just you two & you don't have much stuff, you could build a tiny house for less than $10K

Thanks to this forum, I stayed sane while buying our 1st home via USDA Direct & closed on July 31st, 2015, our 108th day under contract. Two weeks later, we applied for an auto loan from DCU & got approved! Now, all we need is the white picket fence installed.
Message 6 of 19
New Member

Re: Credit score 540 need home loan.

My wife and I have 3 kids, a tiny house would be fine if it was just me alone still, I would stay in my pickup and leave this place.

Message 7 of 19
Valued Contributor

Re: Credit score 540 need home loan.

The negatives on the report is what is bringing the score down, it is a serious issue that prevents a bank from wanting to loan to you. Step #1, clean up the record and build up the record. Given this, it doesn't matter your income level, but I just thought I'd say, you did not mention income level, it is ok to state income level as you are anonymous, we don't know you plus people here will need it to calculate various ratios for you such as debt to income level (DTI) etc so it helps to put all your detailed info down. Anyway, the FICO issue is more important, focus on clearing your report and raising those scores.

Message 8 of 19
New Member

Re: Credit score 540 need home loan.

I ment to put my income, between the wife and I we make about 2200$ after taxes, total of 36,000$ last year. She also gets right at 400$ a month in child support.

Message 9 of 19
Valued Contributor

Re: Credit score 540 need home loan.

By the way for future reference what counts is BEFORE taxes or gross income NOT after taxes since that is what is used in bank underwriting for mortgages and your debt to income ratios, etc.

Message 10 of 19
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