> ## Content Index > Fetch the complete content index at: https://www.mortgagemomradio.com/llms.txt > Use this file to discover other available public pages before exploring further. # Can You Get a Home Loan With a 550 Credit Score or No Tax Returns? - URL: https://www.mortgagemomradio.com/can-you-get-a-home-loan-with-a-550-credit-score-or-no-tax-returns/ - Published: 2023-08-23T21:00:00.000Z - Updated: 2026-09-04T17:36:39.000Z - Description: FHA down to a 550 score, VA near it, 1099 and bank statement loans, asset qualifier loans, DSCR loans for rentals, and hard money. Debbie walks through the programs built for borrowers standard underwriting turns away — plus the six-month reserve requirement nobody warns you about. - Author: Deborah Marcoux - Tags: Podcast, Mortgage Mom Radio, #episode-backfill Mortgage Mom Radio • “Alternative Loan Options” • Live show from Wednesday, August 23, 2023 • 52 minutes • Hosted by Debbie Marcoux, NMLS #237926 Most people who assume they can't get a mortgage never actually ask. In this episode Debbie walks through the loan programs built for the borrowers standard underwriting turns away — low credit scores, self-employed borrowers who write everything off, investors with no rental history, and buyers with money in the bank but income that won't document. FHA down to a 550 score, 1099 and bank statement loans, asset qualifier loans, debt service ratio loans for rentals, and hard money, plus the reserve requirements nobody warns you about. ## Key takeaways - **FHA can go down to a 550 credit score** with the right lender. Every lender sets its own floor — some stop at 600, some at 620 or 640 — so a decline is often that lender's overlay, not FHA's rule. Debbie had a file in process at the time with a **567 score**. - **Medical collections wreck scores but barely matter in mortgage underwriting.** Plenty of borrowers who have paid every card, car and mortgage on time still see a low score because of medical collections — and still get approved. - **VA also reaches down near 550** for eligible veterans, at zero down. FHA is 3.5% down. Both are full-documentation loans: W-2s and pay stubs, or tax returns if you're self-employed. A low score does not excuse you from proving income. - **Self-employed and writing everything off?** Four alternatives to tax returns: a **1099-only** program, a CPA-prepared P&L, a **bank statement** program qualifying on business and personal deposits, and an **asset qualifier** that uses your savings and investment accounts instead of income. - **Buying a rental with no rental history?** A **debt service ratio (DSCR)** loan qualifies the property, not you — the appraiser sets market rent, and if the rent covers the full payment the deal works. You normally need to own a primary residence first, though an existing rental portfolio can substitute. - **Reserves are the requirement people don't see coming.** Nearly every alternative-documentation program wants **six months** of the full payment — principal, interest, taxes, insurance and HOA — documented at closing, plus roughly **two more months for each additional property you own**. You keep the money; you just have to show it. - **Down payments start around 15% on some bank statement products, but 20% prices better**, and many of these programs open up at a 660 score rather than the 700 or 740 people assume. A "no" from one lender is a portfolio limitation — Debbie's client with one year of self-employment was told no elsewhere and was in escrow on her first home. ## Chapters - 01:00What today's show covers: low scores and hard-to-document income - 04:00FHA down to a 550 credit score - 05:00Medical collections, and a 567-score file in process - 08:00VA loans and low credit scores - 09:00Low score, large down payment: where hard money fits - 11:00Credit counseling and the plan to refinance out - 16:00Why a good borrower can still have a low score - 19:00Self-employed option 1: the 1099 program - 20:00Option 2: bank statement loans - 21:00Option 3: the asset qualifier loan - 25:00Option 4: debt service ratio (DSCR) loans for investors - 34:00Reserves: six months, plus two per additional property - 37:00Down payments as low as 15% — and what 20% buys you - 40:00Told no somewhere else: one year self-employed, now in escrow - 44:00Wrap-up and how to catch the next live show ### Find out which program you actually qualify for Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or run your numbers with the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/). Full transcript (lightly edited for clarity) *Auto-generated captions cleaned for readability. Commercial breaks, licensing recitations, and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page.* ### What we're covering today Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, I'm the Mortgage Mom, and today we're talking about alternative loan options. What does that mean? If you're a lower credit score borrower and you're having a hard time getting approved — or if you're having issues verifying your income — what other loan programs or opportunities exist for you? We're going into those today. The first thing we're going to start with is low credit scores. I believe there are a lot of people who don't think they can get financing because they're scared, or because their credit score is lower than what they believe is required. I love that word *believe*, because a lot of people make the assumption that they can't do something — that they can't get a loan, that their credit won't qualify, that their income won't qualify — and they never actually pick up the phone, call us, and find out what their options are. ### FHA down to a 550 credit score I want to bring you FHA as the number one option. FHA loans are fabulous because they allow credit scores as low as 550 — at least that's what I can do with the lenders I work with. We have multiple lenders and they all have their own guidelines. Some of them won't work with you unless your credit score is over 600\. Some won't until you're at 620 or maybe 640\. But we have lenders that will go down to a 550, which is allowing people to get into homeownership and purchase a home. Let me preemptively say that a recent foreclosure, massive late payments, or collection accounts could still disqualify you even if the lender allows your score. But we have many clients with medical collections, and medical collections in mortgage are pretty much ignored — they don't matter to us. They will absolutely bring your credit score down, though. So you may have made all of your credit card payments, your car loans, even your current mortgage on time, and still feel like you can't get a loan. FHA might be a fabulous option for you. We have one in process right now where the borrower has a 567 credit score. The automated underwriting system ultimately gives us the approval, yes or no. That doesn't mean everybody with a 567 gets approved — but her situation allowed for it. How much money you have down, your debt-to-income ratio, the type of property you're buying, all of those factors go into that system and it gives us an answer. So I don't want anybody with a lower credit score to be deterred from trying to become a homeowner. ### VA loans and low scores What else allows lower credit scores? VA. If you're a veteran with eligibility to purchase a home, that will let you into the lower credit score realm as well. Everybody is a little different and your actual application goes through the system for a yes or no, but we have lenders in the VA loan type that will allow credit scores down to that 550 mark. Those are probably the two best scenarios for our listeners. VA and FHA do require that you can income qualify — you have to show us W-2s and pay stubs, or tax returns if you're self-employed. They are low down payment loans: as little as 3.5% down with FHA, or zero down with VA. But they are full income documentation loan types. I'm not telling you that you can have a 560 credit score and not have to prove your income. That is absolutely not the case, and I want you to hear that loud and clear. ### Low score, big down payment: hard money Let's say your credit score isn't fabulous — maybe you're in the low 500s — but you have a good chunk of money in the bank and could make a large down payment. Don't let people tell you no. When we talk with you, we're going to consult you about your credit: what can you do, what's the game plan to correct the report and get the score up? We'll do credit counseling with you so you have the tools you need. But there are also options like hard money, where you can still get a loan to purchase a home if you have a large down payment and can't show income. It's really about the property and the amount you're putting down. The individual investor looks at the property and at your down payment, and that determines whether they want to lend. Your income isn't necessarily a factor and your credit isn't necessarily a factor. Keep in mind that this is a very risky loan for the investor, which means they want a much higher interest rate than you'd get if you were fully documenting. So the credit counseling matters enormously — we create the roadmap so we can refinance you out of that hard money loan as quickly as possible. Six months to twelve months is the best timeframe to target. It gets you in, it creates the homeownership, and then we work the plan. For some people we work the plan first; for others, they need to get into that property now. Hard money is also great when you're buying a fixer-upper that won't qualify for standard conventional financing — the roof leaks and you can see it, there are cracks in the slab, there's mold that needs remediation. Those are great loans for contractors, or somebody doing a quick fix and flip. But if you're an everyday buyer who wants to buy a fixer and fix it up yourself, hard money probably isn't the answer. We have renovation-style loans that might be. We'd want to talk about the plan: are you hiring a contractor, or doing the work yourself? ### Why a good borrower can still have a low score What are some other reasons your credit score might be low? Maybe you're newer to credit. If you recently opened a card or two, you haven't established much history, and those first cards start with very low limits — a $100 limit, a $200 limit, $500 if you're lucky. As we all know, you can go to the grocery store and spend the entire amount, or half of it. As balances climb toward the top of your limit, your credit score plummets, and quickly. So there are reasons you might have a lower score even though you're a very viable borrower with good income who pays bills on time. The higher the credit score, the better the interest rate we can offer, so it's important that we try to get that score up while we're working on the pre-approval. We'll give you the goals and the tips of what to do so that hopefully by the time you're fully pre-approved and you've found a property, the score has actually improved. And even if we can't get you there, there are options. ### Self-employed: 1099, bank statement, and asset qualifier loans Now let's talk about self-employed borrowers. There are a lot of self-employed people who don't believe they can get financing. They're writing off a lot of income on their tax returns, so they aren't showing the full extent of what they earn, and that makes it very difficult on loan programs where you have to show two years of returns. We have a **1099 loan program**, which is pretty cool: we take the 1099s you earned and use those to verify income rather than the full tax return. That might perk up some of the real estate agents we work with. We have **bank statement** products, where we qualify you on the deposits coming into your business and personal accounts. Depending on whether you're a sole proprietor, an S corp, an LLC or a C corp, we look at business and personal statements, figure out what you're depositing monthly and what your expenses are, and determine income that way. We also have an **asset qualifier** program, and that one is really cool. You do not have to be self-employed for it — you can be employed, you can be unemployed, it doesn't matter. We qualify you based on the assets you have saved. We have clients with a decent amount of money in investment accounts whose whole approach is making their money work for them, and kudos to you for that, but it can make qualifying for new financing difficult. The asset qualifier solves that. I hope you're hearing what I'm saying over and over: there is a program for just about every person. When you tell yourself "I can't get a loan right now," that may not be accurate. You have to pick up the phone and tell us your situation — what's going on, where your credit is, how much down payment you want to make, what you have in the bank, what your reserves are. That's what lets us determine the best program for you. Along with that comes some counseling. If we get you into a loan that doesn't have the best pricing — maybe it has a high interest rate — we want a game plan to get you out of it. Everybody has a different page in their book. It might be time for you to buy, but everything else isn't quite falling into place. So we figure out how to get you in, and then how to make it better and how fast. If you're self-employed, we'll talk about where you expect your income to be next year, whether your 2023 returns will look better than 2022 did. We want those conversations so that we're not setting you up for failure. ### Debt service ratio loans for investors The next one is a debt service ratio loan — many people call it a DSCR. This is for when you're buying an investment property and your income isn't enough to qualify for a second mortgage, or you've never been an investor so there's no rental history for us to use to offset the debt. What we're doing is calculating the ratio between the rent the property can bring in and the new mortgage payment. If the property can carry itself, that's what we want — and if it carries itself and more, you get better pricing and better rates. If the whole payment, principal and interest and taxes and insurance, can be covered by the rent that property is capable of receiving, then on that basis alone you could qualify to buy it. That's a great option for employed and self-employed borrowers alike. One thing to keep in mind: you do have to have a primary residence. I've seen very few exceptions. The usual exception is somebody who rents where they live, or who is married and living in a home their spouse owns, but who already has a history of being an investor with other rental properties in a portfolio — even just one other property. In that case we can make the exception. Most of the time, though, they want you to own your primary first, and then this would be for your first investment purchase, or a second or third. ### Reserves, down payments, and credit score minimums A couple of things people ask about. Most of the alternative-documentation programs — not FHA and VA, those are different, those are the low-credit-score options we covered at the beginning — the ones where you qualify on your 1099s, on a P&L from your CPA, on your bank statements, all of those are going to need at least **six months of reserves**. What are reserves? Take the total monthly payment for the property you're buying: principal, interest, taxes, homeowners insurance, and HOA dues if there are any. Combine all of it. That's your complete monthly payment. Multiply it by six. You need that amount in reserves somewhere available. We're not taking the money from you and we're not locking it up through the loan program. You just have to document at approval and closing that after your down payment and your closing costs you still have that much left over. If you own other properties — say you have one, two or three already in your portfolio — you need an additional two months of reserves for each of those. Three more properties means another six months, which puts you at twelve. That's a general overview; every program has slightly different guidelines, but it touches the basics on most of them. Many of these programs are available at a 660 credit score, so you don't necessarily need a 700 or a 740\. Obviously the higher the score, the better the rate, and the higher the score the less money down may be required. As scores get lower they require a larger down payment. Down payments go as low as 15% on some of the bank statement products, although rates are better with at least 20% down. Just like your credit score: the bigger the down payment, the better the rate. ### When another lender says no I want to point out something. We have a client in process right now buying her first property. She's been self-employed for one year. Her tax returns aren't enough to qualify her, but she has the down payment and a good credit score, and we were able to get her into a program that works — one year of tax returns, or one year of bank statements. She was told no by another lender. That doesn't mean those lenders are doing anything harmful or on purpose. They may not have the programs available to them. If I worked at one of the larger banks and had only that bank's portfolio to work from, I might have to tell you no too — no, I don't have a program for you, you'll have to wait until you file that second year of returns. We have loan programs in many different arenas, so there's a good chance we might be able to tell you yes even when somebody else told you no. That's exactly what happened with her. She heard the show, thought she'd call anyway, and we spent a couple of months getting her documentation together and submitting to a few different banks to find where her puzzle piece fit. Now she's in escrow buying her first property and she is ecstatic. So when other people tell you no, don't take it as the final answer. We're going to be straightforward with you. We're straight shooters. We're going to tell you what we know and whether there's opportunity there. We may need you to apply before we can give you a solid yes or no, but we are not going to drag you through the trenches if there's no possibility — we'll talk through a game plan to get you to the point where we can. And if the opportunity is there, we'll explain what it looks like: how much you might need down, what kind of rate would be appropriate for that loan type, what the monthly payment would look like. Then you decide. ### Wrap-up I hope this was helpful and that it reached somebody who didn't think they could do something before, and now they can. We're here to educate and to get you to that next step. If you want to know when I go live, text the word MOM to 844-935-3634 — that's also the office number if you'd like to talk with me or one of the girls on my team. At mortgagemomradio.com you'll find the calculators, the tools, and a way to book a free phone consultation. I do the show live every Wednesday right between 1:00 and 1:15, and I'll be back next Wednesday. Have a fabulous rest of your week. Bye-bye. Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of August 23, 2023, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.