Can You Get a Mortgage with a 520 Credit Score?

With a credit score around 520, you may still qualify for an FHA loan — provided you make a larger down payment and meet compensating factors — this guide breaks down what credit-challenged borrowers need to know.

Many prospective home buyers assume that your credit must be in the 600s or 700s to get a mortgage. This is certainly not the case, as many mortgage lenders will provide home loans to borrowers with credit scores as low as 500. If you have a 520 credit score, the following loan options may be available to you.

We have decades of experience in helping individuals with lower scores to purchase or refinance a home. If you were told you cannot qualify by others, then give us a chance to help you. Simply complete this short form and one of our loan officers will setup a time to discuss your options.

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Mortgage Options with a 520 Credit Score

There are a handful of loan programs available to individuals with low credit scores. Although there are a few options, not all lenders will accept lower scores despite being allowed per agency guidelines.

Once you review the options below, contact us to speak with one of our loan officers. We are experts in working with lower credit scores.

FHA Loans for Borrowers with a 520 Credit Score

The most common type of loan available to borrowers with a 520 credit score is an FHA loan. Keep in mind, that in order to qualify for a 3.5% down payment, you must have at least a 580 credit score.

For borrowers with a credit score between 500-579, you may still qualify for an FHA loan, but will be required to put 10% down.

The basic requirements to get approved for an FHA loan are:

Two year work history
Fully document your income
Minimum credit score of 500
Home must be your primary residence
Maximum debt to income ratio of 56.9%

FHA loans can be used to purchase or refinance a home. Plus, the FHA 203k rehab loan is a great way to buy a home and also finance the repairs or improvements needed.

VA Loan with a 520 Credit Score

One of the strange phenomenons is the high number of eligible veterans who have less than perfect credit. We are not sure if there are any studies that can detail some numbers on the topic, but we seem to hear from many Veterans who are credit challenged.

Many veterans may be surprised to know that VA guidelines do not specify a minimum credit score to qualify. Lenders are still required to verify income, employment, and VA eligibility. However, many lenders have what are called “lender overlays” in the industry which are self emposed guidelines that make it more difficult to secure a loan approval.

If you already own a home with a VA loan but you are looking to refinance, we can do this for you using the VA IRRRL program with low credit.

If you are having difficulty quailfying for a VA loan due to credit issues, then give us a chance to help you.

USDA Loan with a 520 Credit Score

USDA loans are a great option for home buyers who are looking for a home in a rural area with 100% financing. That said, one of the significant challenges is finding a company willing to help people with low credit scores.

You may find other lenders requesting scores over 600. However, there is no minimum credit score requirement for a USDA loan. The reality is lenders are looking to balance risk. When you have a zero down program, buyers have little financial commitment with just as little at risk if the home is foreclosed upon. As a result, many lenders offering USDA loans “prefer” to work with borrowers who have good credit and a positive payment history. This is where we stand out from the others and can help you with low credit.

Here is what is needed to get approved for a USDA loan:

The home must be located in a rural area as designated by the USDA
The home must be used as your primary residence
The home cannot be used as a farm or for commercial purposes
You must fully document your income
Your income must fall within the USDA income limits for your county

If you are interested in a USDA loan, contact us to discuss your options. Read more about usda loans.

Non-Prime Loans for Borrowers with a 520 Credit Score

In addition to FHA loans, there are also what are known as non-prime loans / non-qm loans. These are loan products that are offered by alternative mortgage lenders that provide financing to borrowers with bad credit, and that face other challenges qualify for conventional and FHA loans. These lenders provide home loans to borrowers with credit scores as low as 500. You can learn more about some of these lenders below.

Compensating Factors That Can Help You to Qualify

When loan applicants have lower credit scores, underwriters look for compensating factors to offset the risks associated with having poor credit. Some but not all of the compensating factors are as follows:

High income
Low debt to income ratio
Estimated post closing cash reserves
Employment history and job stability
Co-signer with good credit

Having one or more of these compensating factors in your corner can help score a mortgage approval. One of the key elements is to have an experienced loan officer who knows how to prepare the loan package and a solid case to the underwriter prior to their review.

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Q&A – 520 Credit Score Mortgage Options

Can I get a conventional loan with a 520 credit score?

No, the minimum credit score required for a conventional loan is a 620.

Can I get an FHA loan with a 520 credit score?

Yes — technically the FHA loan program allows credit scores as low as around 500 (with higher down payments), but many lenders require higher scores.

Can I get a USDA loan with a 520 credit score?

No, the minimum credit score required for an automated approval for USDA loan is a 640. Sometimes credit scores below a 640 are approved, but it will require a manual approval.

Can I get a VA loan with a 520 credit score?

Yes, if you are eligible for a VA loan, you may be able to qualify with a 520 credit score.

Can I get a jumbo loan with a 520 credit score?

Technically, there isn’t a minimum credit score requirement for jumbo loans. Most jumbo mortgage lenders require a borrower to have a credit score of at least 680. However, there are some non-prime jumbo lenders that go down to 580.

What if I have had a major credit event recently?

If you have had a recent bankruptcy, foreclosure, or short sale, you may be eligible to get a mortgage. There are several non-prime lenders that offer loan options to borrowers even just 1 day after such events.

Are there other credit requirements that I should know about?

Most mortgage lenders require that you have 3 trade-lines on your credit report. This can be auto loans, credit cards, personal loans, or other qualifying lines of credit. There can be exceptions to this rule, including non-traditional sources of credit, such as phone bills, utilities, gym memberships, etc.

How can I find out if I qualify for a mortgage with a 520 score?

It is easy to find out if you qualify for a mortgage. We can help match you with a mortgage lender that helps borrowers with a 520 credit score. They can assist you in determining your eligibility for a mortgage. To have a mortgage lender contact you, please fill out this form.

What down payment is required if my score is in the 500-529 range?

If your credit score falls between approximately 500-579, you’ll generally need a down payment of at least 10% under FHA minimums.

What credit score do most lenders require despite the FHA minimum?

While FHA guidelines permit very low scores, many lenders impose overlays and require credit scores of 620 or higher for approval.

What other factors matter besides credit score when my score is low?

When your credit score is around 520, lenders will focus more heavily on compensating factors including: stable employment history, low debt-to-income ratio (DTI), sufficient cash reserves, larger down payment, and strong payment history on existing obligations.

How will a 520 credit score affect interest rates and loan cost?

Borrowers with lower credit scores may receive higher interest rates and additional lender-fees or surcharges. Even with qualification, the cost of borrowing will likely be higher than for higher-score borrowers.

What are the benefits of FHA loans for credit-challenged borrowers?

FHA loans allow lower down payments (3.5% for higher scores), more lenient credit history requirements, and more flexible underwriting for first-time or moderate-income buyers, compared to many conventional loans.

Are FHA loans the best option for someone with a 520 score?

They may be one of the few viable options — but it’s wise to compare other programs (such as non-prime or subprime lenders) and weigh the total cost before committing. Improvements in your credit score can unlock better terms.

What steps can I take to improve my chances with a 520 credit score?

Review and dispute credit report errors
Limit new credit applications
Reduce revolving credit utilization below 30%
Maintain steady employment for at least 2 years
Save for a larger down payment
Work with a lender experienced in low-score FHA underwriting