Teacher Next Door Blog

How can a teacher with bad credit get approved for a mortgage to buy a home?  As the largest National Home Buying Program in the U.S., it is a question we are asked every day.   The honest answer is, it depends.

FICO scores between 500-580

FHA now allows loan approvals with FICO credit scores as low as 500.  However, if your score is between 500 and 580, there are at least two important differences from the typical FHA loan:

Down Payment: 
FHA requires all buyers with scores below 580 to put a minimum of 10% down.  Whereas other loan programs may be as low as 0-3.5% down.

In addition to the larger down payment, with a score below 580, FHA will require that the application go through a process known as “hand-underwriting,” as opposed to the typical automated process.  The underwriters will be looking for a specific hardship to explain the low credit score and will likely need a good “letter of explanation”

Compensating factors: During hand-underwriting, the underwriter will consider compensating factors, to get the loan approved for you.  These may include things such as a long and stable employment history, high income, excellent rental history and high cash reserves.  A low debt-to-income-ratio will also help.  For example, 29/41. (29% or gross for PITI and 41% of gross total monthly debt.) 

Teacher Next Door accepts all applications, regardless of credit score and our Preferred Lenders will work hard to get a loan approval for you.  Many buyers with scores below 580 may find it necessary, or easier, to repair their credit prior to moving forward with a home purchase.  Teacher Next Door’s Fresh Start Program could be a possible solution to help you raise your score.

FICO score of 580+

If your score is above 580, you should be able to get an FHA loan with only 3.5% down payment.  You may also not need to go through the hand underwriting process, making it easier to get approved.    

Grants and Down Payment Assistance for Teachers

All teachers and school employees are eligible for the Teacher Next Door GRANT, regardless of credit score.  However, you would still need to qualify for the mortgage financing.  With a credit score above 580, you may be eligible for down payment assistance.  Teacher Next Door requires each of our three national Preferred Lenders to offer several different down payment assistance options.  These DPA programs may include Home in Five Advantage, Georgia Dream, Florida First, Chenoa, Unison and several others.  When you apply through the Teacher Next Door Program, a TND Program Specialist will contact you to go over the various options.  A credit check is not required to complete the pre-application

If you have other Questions about the Teacher Next Door Program, please visit the Frequently Asked Questions section at


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Fresh Start Program

Posted by Teacher Staff on April 8th, 2019 4:12 PM


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