Need advice for an FHA mortgage. First time buyer

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Need advice for an FHA mortgage. First time buyer

Kevin Wiley
Lender · Largo, FL · Member since 2017 · 71 posts · 34 votes

Hello all, 

I have a situation and need some advice. There are a couple of moving parts so please bear with me. 

1st, I have poor credit. My fico scores are 594, 606 and 619. 

 2nd, I am working on a flip right now and expect to profit about 50k once it sells. It will be hitting the market in about 2 weeks and should sell fast. 

3rd, I have about 20k in total debt (19k car loan and 1k bad debt). I intend on paying g these off from my flip. 

4th, my income is a base pay of 42k per year plus bonuses and overtime. 

Now, here is my question. Given all of the above information, are there any loan officers or experienced buyers here that can work with me to find a lender for an FHA loan? I know FHA requirements are a 580 score, 3.5% down, and no larger than 4 units. I've called 3 different lenders and all of them require higher credit scores and don't go above 2 units with FHA.

I found a PERFECT triplex in St. Petersburg,  Florida that I want to house hack in as my first purchase. The property consists of a 3/1 single family home and 2 1/1 unit duplex. 

Can anyone more experienced in banking lend me some advice? 

Thank you so much

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Jerry Padilla
Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
9y

@Kevin Wiley

Lenders go according to your middle credit score. I haven't heard of any lenders that go down to 580. 600 best case scenario, but you are going to have to DTI limitations, with greater down payment requirements. A 620 credit score is going to put you in a lot better position with FHA. You can do 4 unit properties without an issue, I haven't heard of this issue with an FHA, except with the FHA 203k loan. There will be many more great deals out there, and you may have to wait until you sell your flip and get your credit up to purchase and put yourself in a better position.

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  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    9y

    @Kevin Wiley

    Lenders go according to your middle credit score. I haven't heard of any lenders that go down to 580. 600 best case scenario, but you are going to have to DTI limitations, with greater down payment requirements. A 620 credit score is going to put you in a lot better position with FHA. You can do 4 unit properties without an issue, I haven't heard of this issue with an FHA, except with the FHA 203k loan. There will be many more great deals out there, and you may have to wait until you sell your flip and get your credit up to purchase and put yourself in a better position.

    1Reply
  • Peter Mac
    Rental Property Investor · Irvine, CA · Member since 2017 · 29 posts · 22 votes
    9y

    Kevin - this sounds tough. BUT, I like the fact that you're trying to take action. Action brings results. Never stop trying! Let me know how it goes.

    1Reply
  • Art ShalomovBusiness Member
    Lender · Scottsdale, AZ · Member since 2017 · 39 posts · 39 votes
    9y
    Hi Kevin, Some one with the 580 and 600 fico is eligible but it doesn't mean they would actually get approved. These FHA programs all come with restrictions and almost impossible to close. At 620, you would have a much better chance of getting it done. The lower the scores the higher the risk for the lender, the tougher it is to get approved. I would focus on getting the scores up. My first question would be, what kind of stuff do you have on your credit that your mid score is 606? Paying off the car wouldn't really help your scores but would help your debt to income ratios. Do you have any revolving debt? How old is the most recent collection?
    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    HI Kevin,

    Technically FHA has no Fico requirements, its banks that put these requirements on their FHA programs.

    You will need to meet:

    - FHA self sufficiency rules

    - 3 months PITIA reserves for 3-4 unit properties

    - and other standard FHA requirements when purchasing a 3-4 unit property with FHA financing

    Some lenders have restrictions on below 620 Fico programs so you'll hear many mixed stories.

    0Reply
  • Michael Cohen
    Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
    9y
    Melvin List
    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    9y

    @Kevin Wiley when lenders tell you they need a 580, 600, or 620 to do an FHA loan they are giving your their overlay and not an FHA guideline. You really need for someone that has no lender overlays and see if they can get your file approved. Also, I would imagine once your pay off some of the debt that you could do a rapid re score to get your scores up. I would not pay off anything until you speak with an experienced loan officer who knows how to get you scores up.

    C2 Financial
    WebsiteView Page
    1Reply
  • Kevin Wiley
    OP
    Lender · Largo, FL · Member since 2017 · 71 posts · 34 votes
    9y

    Thank you all so much. 

    @Jerry Padilla, I think that's smart too. I don't think it will need a 203k since it's in pretty  good condition. I might just use my own cash or renovate while I live there. 

    @Peter Mac, I appreciate the encouragement! It always helps keep us going :) 

    @Art Shalomov, my collections debt is about a year old. As for revolving debt, I've got 4 credit cards, 2 of which have a zero balance, and the other 2 I use and pay off. 

    @Melvin List, I appreciate that advice as well. I had a very intelligent, experienced loan officer whom I tried to contact yesterday only to find out he recently accepted a job on Capital Hill :/ he was brilliant with credit too. So far I'm seeing that many LO's don't understand credit or have a credit department in  their companies. 

    0Reply
  • Michael Cohen
    Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
    9y

    I will add the dirty little secret: credit SCORES, in and of themselves, are not all that matters. Your credit profile (or history) is just as important. For example, a lender may technically allow 590 scores on an FHA, but the reality is that if your score is at 590, there are issues going on that are going to be hard stops: unpaid collections, tax liens, recent late payments, etc.

    You're best off having a qualified, competent lender pull your credit profile and review it. If he/she is good, they can identify the issues and run What-if Scenarios to see how to fix your credit as quickly and cheaply as possible so it's no longer an issue.

    1Reply
  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Kevin Wiley Look up my company in your area. We regularly close FHA loans with a 580 so long as its a stick built your fine 1-4 units.

    FHA Standard (includes Simple Refi)

    TypeUnitsLoan
    Min    		Loan
    Max    		LTV
    Max    		FICO
    Min
    1$10,000$424,10096.5%580
    2$10,000$543,00096.5%580
    3$10,000$656,35096.5%580
    4$10,000$815,65096.5%580
    0Reply
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