Electric Loan Officer

Category - Credit

FHA Loans with 580 credit scores | Lending is getting agressive

FHA loan with 580 fico

It is crazy to see that mortgage lending here in Phoenix is starting to get much more agressive, we are seeing loan programs to qualify borrowers a day after their foreclosures and short sales and now the credit score overlays for FHA loans have completely disappeared.

The thing is, FHA loans always required a minimum credit score of a 580, it has been this way for a while however many lenders/investors who were buying a funding these loans slapped on an overlay of 620 or 640. The investors we are working with now have removed that overlay completely and are doing FHA loans with 580 credit scores or better.

I can’t tell you how many people we have had to decline due to their credit score not meeting the minimum requirements, we have free in house credit services but sometimes they just couldn’t get the scores to where they needed to be to qualify at 620 and 640. It is a great thing that we have kept a pretty good database as it sounds like I have my work cutoff for me in regards to calling everyone who previously applied and we couldn’t get financed.

So what else is on the horizon as far as potentially “niche” type products? We have seen a couple investors out there offering stated income loans in which we thought that we would never see again although you will not find and 100% financing type products for stated income as they now require the borrowers to have a lot more skin in the game… By that I mean investing a much larger down payment, I guess they got smart and decided this is the only way to get the client from walking away from the house if they are in financing distress.

My bet is that with the market flattening out and home prices stabilizing, the investors that are buying these mortgages have made a decision that it is safe to come out and test the waters with innovative new programs. As long as they have all learned their last time from the last housing bubble and don’t come out with any of these ridiculous products like the negative am option arms I think we will maintain some consistency within the market place and it will continue to be a safe bet for homeowners.

But back to FHA loans with 580 credit scores, because Phoenix, Az was one of the places that got hit pretty hard with the housing collapse I think this is a great product to be able to offer as there are many qualified candidates who have great job history, a down payment and can afford a housing payment but are unable to meet the current credit score guidelines of 620. As far as overlays the only two things I can think of here is that we will have to follow FHA’s manual debt to income ratio max of 31/43 (contact me and I will calculate yours for you) and we do not allow any of the down payment assistance products.

As long as you meet the FHA 36months from foreclosure or delinquent short sale and 24 months from a bankruptcy seasoning periods you should be good to go to pursue a pre-approval with us, reach out now and let’s get you rolling!


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Where other lenders fail, we prevail | We close your turndowns


I’ve got a great story about a Real Estate Broker whose bread and butter Loan Officer let’s him down at the 11th hour, and by 11th hour I mean on the 6th week of a 30 day escrow. No, I’m not kidding… Unfortunately things happen, I have learned from many of my own mistakes but you have to hear this story.

A couple weeks back I get a phone call while I am sitting in the Westin Bellevue in downtown Bellevue Washington. The phone call was from a Real Estate broker who was referred to me by a Real Estate agent that knew me from a few years back. Apparently a few years back I took a lender turndown and closed it for her client, and she remembered.

This Real Estate Broker was in a predicament, his loan officer from “X Mortgage” (sorry I can’t put the name here otherwise some may consider it “slander”) declined his own personal mortgage loan at the 11th hour. He had heard that I was able to work some magic for the agent that referred him to me years ago and he wanted to see if I could help. My reply was “you know, I can do some things others cannot but I can’t make you any promises”. I politely asked him to send me everything he had sent to his other loan officer and that I would be back on Monday and would review it and give him a decision.

Once back in town I took a look at the package, cross referenced it with agency guidelines to ensure that we wouldn’t have any problems and everything checked out great. I picked up the phone and let the borrower/agent know that I could do his deal, he was astonished but didn’t really believe anything until we had docs out. My team transferred the case number and we had his docs to title in about 10 days and that’s all she wrote. Another deal saved, I look like a hero, I love my job.

So why the heck is it that I can do deals others cannot? I mean seriously, it’s a very valid question. In this case it had to do with being Fannie, Freddie and Ginnie direct. We do not fund these loans and sell them to an investor like Wells, or GMAC or Flagstar who slap on a bunch of overlays! We fund these loans, sell them direct to agency (FNMA, FHLMC, GNMA) and retain the servicing rights on about 90%. This means that 90% of the loans we fund the borrowers will make their payments to us, because we have the financial capacity (currently servicing $2.7b) to do this we do NOT have to fit into someone elses box. Plain and simple, we make our own box. I was not used to this at Nova, I was used to every lender we sold to having their overlays and trying to figure out where to place a loan. Now, I dont have to deal with that, I can spend my time finding people who need my help and this has proven to be truly rewarding.

So after we get this deal closed, the agent who referred this borrower/agent to me calls and says, “hey listen, you always seem to prevail where our other lenders fail and quite frankly we don’t want to have to put our clients through the ringer, we want to start sending them to you first”. I politely and professionally accepted the compliment and the business, within the next week we had two more clients under contract. This to me is success.

-Mr. Electric Himself

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