Buying a House with a 600 Credit Score

When your score is in the “Fair” range, lenders look for compensating factors to feel safe:

• Cash Reserves: Having 3–6 months of mortgage payments in the bank.

• Low DTI: Keeping your total monthly debts (including the new mortgage) below 43% of your gross income.

• Rental History: Proof that you have paid your rent on time for the last 12–24 months.

This depends on the market. If interest rates are rising rapidly, waiting six months to gain 20 points might actually cost you more in the long run than buying now at a 600 score. However, if rates are stable, moving from a 600 to a 640 can save you tens of thousands of dollars in interest over the life of a 30-year loan.

If you are 3–6 months away from buying, focus on these “quick wins”:

• Lower Credit Utilization: Pay down credit card balances to below 30% of their limits.
• Dispute Errors: Check your reports at AnnualCreditReport.com for any late payments that weren’t actually late.

• Avoid New Debt: Don’t open new credit cards or take out a car loan right before applying for a mortgage.

Not necessarily. For an FHA or VA loan, you can still put down as little as 3.5% or 0%, respectively. However, if your application is “weak” in other areas (like having a very high DTI ratio or unstable job history), a lender might ask for a larger down payment to “offset” the risk of the 600 credit score.

It’s unlikely. Most conventional lenders (those following Fannie Mae and Freddie Mac guidelines) have a strict floor of 620. If your score is exactly 600, you will almost always be steered toward an FHA loan. Raising your score by just 20 points could open the door to conventional financing, which often has cheaper private mortgage insurance (PMI) for those with decent credit.

Potentially. Lenders often apply “Loan-Level Price Adjustments” (LLPAs). These are one-time fees or rate increases based on the risk associated with a lower credit score. You may also find that fewer lenders are willing to offer “lender credits” to cover your closing costs if your score is at the lower end of their requirements.

Your credit score directly influences your interest rate. A borrower with a 600 score will likely receive an interest rate 1% to 2% higher than someone with a 760 score.

The Math: On a $300,000 mortgage, a 1% higher interest rate can add roughly $200 to your monthly payment. This higher payment increases your Debt-to-Income (DTI) ratio, which may lower the total loan amount a bank is willing to give you.

Yes, depending on your background and location:

• VA Loans: For veterans and service members, there is no government-mandated minimum score. While many lenders look for a 620, some specialized lenders will work with scores as low as 580 or 600.

• USDA Loans: These are for rural and suburban areas. While a 640 score allows for automated “streamlined” approval, many lenders will manually underwrite a 600 score if you have a stable income.

• Non-QM Loans: Non-qualified mortgages are offered by private lenders who look at “alternative” factors like bank statements instead of just a credit score.

Yes. In fact, FHA loans are the most popular choice for buyers in this range. Because your score is above 580, you qualify for the 3.5% down payment advantage. If your score were below 580, you would likely be required to put down 10%.

Technically, you can buy a house with a score as low as 500 if you have a 10% down payment. However, for most low-down-payment programs (3.5% down), a score of 580 is the standard benchmark. A 600 score puts you safely above the minimum for several major loan types, though it may still be too low for many “Conventional” loans which typically prefer a 620 minimum.