My 618 Credit Score Got Me FHA Approved: Here's What It Really Cost Me vs. Waiting

When I started house hunting in March 2024, my credit score was 618.

My situation:

• Renting: $1,450/month (going up to $1,595 in June—10% increase)
• Savings: $12,000 (enough for 3.5% down + closing costs)
• Income: $58,000/year ($4,833/month gross)
• Debt: $385/month (car payment $285, credit cards $100 minimums)

My question: Should I buy now with my 618 credit score, or wait 3-4 months to improve my score to 660+?

What my loan officer told me: “You qualify for FHA at 618—let’s get you out of that rent trap.”

What nobody told me: My 618 credit score would cost me $63/month more than if I’d waited to improve my score to 660.

Over 5 years, that’s $3,780 in extra interest.

Here’s my decision analysis—what I paid to buy at 618, what I would’ve paid if I’d waited to improve my score, and whether buying immediately or waiting 3 months saves more money.

My FHA Qualification at 618 Credit Score

What I Qualified For

Credit score: 618 (middle score from 612, 618, 625 across three bureaus)

FHA approval: Yes, with conditions

Down payment required: Most lenders wanted 10% down (580-619 tier), but I found one lender accepting 3.5% down at 620-639 with compensating factors.

My compensating factors:

• 3.5 years stable employment (same employer since 2020)
• $12,000 savings (4 months reserves after down payment and closing)
• Debt-to-income 38% (below 43% limit)
• Perfect 24-month rent payment history (verified by landlord)

Interest rate quoted: 7.25% (compared to 6.75% for 640+ borrowers, 6.50% for 660+ borrowers)

Home I was buying: $215,000 purchase price

FHA loan details:

• Purchase price: $215,000
• Down payment (3.5%): $7,525
• Loan amount: $207,475
• Upfront MI (1.75%): $3,631 (financed into loan)
• Total loan: $211,106
• Interest rate: 7.25%
• Monthly P&I: $1,441
• Annual MI (0.85%): $150/month
• Property taxes: $245/month
• Homeowners insurance: $110/month
• Total monthly payment: $1,946

Cash needed at closing: $7,525 down + $5,200 closing costs = $12,725

I had $12,000 saved—came up $725 short.

Solution: My parents gifted me $1,000 (FHA allows 100% gift funds). Total out-of-pocket: $11,725 personal savings + $1,000 gift.

Why I Wanted to Buy Immediately

Reason #1: Rent was increasing

My lease was ending in June. Renewal options:

• $1,595/month (10% increase—landlord’s offer)
• $1,650/month for month-to-month (if I delayed while improving credit)

Extra rent cost if I waited 3 months: $1,650 × 3 = $4,950

Reason #2: I was “throwing money away” on rent

At $1,450/month rent, I was spending $17,400/year with zero equity.

If I bought, my $1,946 mortgage would be $5,928/year more than rent—but I’d be building equity and locking in housing costs.

Reason #3: Home prices were rising

In my market (Raleigh, NC), home prices were increasing 0.5-1% per month (6-12% annually).

If I waited 3 months, my $215,000 home could be $218,000-$221,000 (3-month appreciation).

Extra cost if prices rose: $3,000-$6,000 higher purchase price.

My decision: Buy now at 618 credit score and accept the 7.25% rate.

What I Actually Paid (618 Credit Score, 7.25% Rate)

First-Year Costs

Closing costs: $12,725 (down payment + closing)

Monthly payment: $1,946 ($1,441 P&I + $150 MI + $245 taxes + $110 insurance)

First-year total housing cost: $12,725 closing + ($1,946 × 12 months) = $36,077

If I’d kept renting: $1,450 × 12 = $17,400

Extra cost Year 1 (buying vs. renting): $36,077 - $17,400 = $18,677 more to own

But: I built $7,200 equity (principal paydown in Year 1) + $6,500 appreciation (home now worth $221,500 after 3% appreciation).

Net equity: $13,700

True cost Year 1 after equity: $18,677 extra - $13,700 equity = $4,977 net cost to own vs. rent

Five-Year Costs (618 Score, 7.25% Rate)

Total paid over 5 years:

• Principal and interest: $1,441 × 60 = $86,460
• Mortgage insurance: $150 × 60 = $9,000
• Property taxes: $245 × 60 = $14,700
• Insurance: $110 × 60 = $6,600
• Total payments: $116,760

Add closing costs: $12,725

Total invested: $129,485

Equity built:

• Principal paydown: $42,100 (paid down balance from $211,106 to $169,006)
• Home appreciation: $32,250 (home worth $247,250 after 15% appreciation over 5 years)
• Total equity: $74,350

Net cost after equity: $129,485 - $74,350 = $55,135 net cost over 5 years

If I’d kept renting 5 years: $1,450 × 12 = $17,400/year increasing 3% annually = $89,880 total (zero equity)

Buying vs. renting savings: $89,880 rent - $55,135 net ownership cost = $34,745 saved by buying

What I Would’ve Paid If I’d Improved My Score First (660 Credit, 6.50% Rate)

The 3-Month Credit Improvement Plan

Starting score: 618

Goal score: 660 (42-point improvement in 3 months)

Strategy #1: Pay down credit cards

My credit card balances: $2,800 on $4,200 total limits = 67% utilization (very high)

Goal: Get under 30% utilization (under $1,260 balance)

Required paydown: $1,540

My plan: Pay $515/month extra for 3 months (beyond minimum $100/month)

Impact: 67% to 30% utilization = 25-35 point credit boost in 90 days

Strategy #2: Become authorized user

My mom’s credit card:

• Age: 14 years (vs. my 3-year average)
• Limit: $18,000
• Balance: $600 (3% utilization)
• Payment history: 100% on-time

Impact: Adds 7-12 points in 30-60 days (once account reports to my credit)

Strategy #3: Dispute error

My credit report showed a late payment on a utility bill from 2 years ago that I don’t recognize.

Action: File dispute with all three bureaus

Impact: If removed, adds 8-12 points

Total potential improvement: 25-35 (utilization) + 7-12 (authorized user) + 8-12 (dispute) = 40-59 points

New score projection: 618 + 40-59 = 658-677 (target 660+ achieved)

Cost of Waiting 3 Months

Extra rent (June-August): $1,650 × 3 = $4,950 (month-to-month premium while waiting)

Home price appreciation: $215,000 × 1% = $2,150 (assumed 1% quarterly appreciation)

Total delay cost: $4,950 rent + $2,150 appreciation = $7,100

But: I’d qualify for 6.50% rate (vs. 7.25%) and save $63/month.

What I Would’ve Paid at 660 Credit Score (6.50% Rate)

Home purchase price: $217,150 (after 1% appreciation during 3-month wait)

FHA loan details:

• Purchase price: $217,150
• Down payment (3.5%): $7,600
• Loan amount: $209,550
• Upfront MI (1.75%): $3,667 (financed)
• Total loan: $213,217
• Interest rate: 6.50% (vs. 7.25%)
• Monthly P&I: $1,348 (vs. $1,441 at 7.25%)
• Annual MI (0.80%): $142/month (vs. $150 at 618 score)
• Property taxes: $248/month (slightly higher on $217K vs. $215K)
• Insurance: $110/month
• Total monthly payment: $1,848 (vs. $1,946 at 618 score)

Monthly savings: $1,946 - $1,848 = $98/month saved

Five-Year Cost Comparison: 618 Score vs. 660 Score

Option 1: Buy at 618 score (7.25% rate)

• Total payments (5 years): $116,760
• Closing costs: $12,725
• Total invested: $129,485
• Equity built: $74,350
• Net cost: $55,135

Option 2: Wait 3 months, buy at 660 score (6.50% rate)

• Extra rent while waiting: $4,950
• Total payments (5 years): $110,880 (lower due to 6.50% rate)
• Closing costs: $13,100 (higher due to $217K price vs. $215K)
• Total invested: $128,930
• Equity built: $74,700 (slightly higher due to higher purchase price)
• Net cost: $54,230

Net savings by waiting: $55,135 (buy at 618) - $54,230 (wait for 660) = $905 saved over 5 years

Monthly savings: $98/month × 60 months = $5,880

But:

• Paid $4,950 extra rent while waiting
• Paid $2,150 more for home (price appreciation)
• Total delay costs: $7,100

True savings: $5,880 payment savings - $7,100 delay costs = -$1,220 (buying at 618 was actually $1,220 cheaper)

What I Learned: The Break-Even Analysis

When Buying at 618 Makes Sense

✅ Rent is increasing (my rent went up 10%—$1,450 to $1,595)
✅ You have compensating factors (stable employment, reserves, low DTI)
✅ Home prices are rising fast (0.5-1% per month in your market)
✅ You’re paying high rent ($1,400+/month)
✅ You plan to refinance in 2-3 years (once you improve credit and build equity)

In my case: Buying at 618 saved me $1,220 over 5 years compared to waiting 3 months for 660 credit—because rent increases + home appreciation outweighed the higher interest rate.

When Waiting to Improve Credit Makes Sense

✅ Rent is stable (lease locked in for 12+ months at current rate)
✅ You’re close to 640 or 660 (10-20 point improvement in 1-2 months)
✅ Home prices are stable or declining (no urgency to buy)
✅ You’re paying low rent (under $1,200/month)
✅ You can improve score quickly (high credit utilization to pay down, errors to dispute)

Example: If my rent was $1,200/month (not increasing), waiting 3 months would’ve saved me $2,055 over 5 years (lower rate savings minus delay costs).

The Credit Score Sweet Spots

580-619: 10% down required—very expensive. Improve to 620+ to access 3.5% down.

620-639: Some lenders accept 3.5% down, but rates are 0.50-0.75% higher. If you can improve to 640+ in 2-3 months, wait.

640-659: Standard 3.5% down, moderate rates. If you can improve to 660+ in 1-2 months, consider waiting.

660-679: Good rates (within 0.25% of 680+ tier). Marginal benefit to improving further.

680+: Best FHA rates (within 0.125% of conventional). No need to wait unless you can quickly hit 700+ for conventional eligibility.

My 618 score was in the worst tier (just below 620 cutoff for standard 3.5% down)—but my compensating factors got me approved.

My Refinance Plan: Eliminating the Higher Rate

Current situation (1 year later):

• Credit score: 667 (improved from 618—paid down cards, disputed error, authorized user reported)
• Home value: $228,000 (6% appreciation in 12 months)
• Loan balance: $206,500 (paid down $4,606 in Year 1)
• Equity: $21,500 (9.4%)

Refinance goal: Once I hit 20% equity (3-4 more years), refinance to conventional at 620+ credit to eliminate mortgage insurance and reduce rate.

Projected refinance timeline: 2027 (3 years from purchase)

Expected refinance scenario:

• Home value: $250,000 (projected 16% appreciation by 2027)
• Loan balance: $195,000 (paid down $16,106 over 3 years)
• Equity: $55,000 (22%)
• New conventional loan at 700+ credit: 6.00% rate, no mortgage insurance
• Monthly payment: $1,169 P&I + $0 MI + $260 taxes + $115 insurance = $1,544/month
• Current FHA payment: $1,946/month
• Monthly savings after refinance: $402/month = $4,824/year

Total cost of my 618 FHA decision:

• Years 1-3: Pay higher rate (7.25%) and higher MI = $3,780 extra vs. 660 score
• Years 4-30: Refinance to conventional, eliminate MI, reduce rate = save $402/month

Net result: My 618 FHA loan costs me $3,780 extra in first 3 years, but I entered homeownership 3 months earlier, avoided rent increases, and locked in $215,000 purchase price instead of $217,000+.

The Bottom Line: Should You Buy Now or Improve Credit First?

I bought at 618 credit score and paid $3,780 extra in interest over 5 years compared to waiting for 660.

But accounting for rent increases and home appreciation, buying at 618 was $1,220 cheaper than waiting 3 months.

My advice:

Buy Now at Lower Credit Score If:

✅ Rent is $1,400+/month and increasing
✅ Home prices rising 0.5%+ per month in your market
✅ You have compensating factors (reserves, stable employment, low DTI)
✅ You’re comfortable refinancing in 2-4 years to lower rate and eliminate MI

Wait to Improve Credit If:

✅ Rent is stable and affordable (under $1,200/month, lease locked in)
✅ Home prices stable or declining
✅ You can improve 20-40 points in 2-3 months (high utilization to pay down, errors to dispute)
✅ You’re close to a tier cutoff (615→620, 635→640, 655→660)

Check your real FICO credit score (not Credit Karma VantageScore) to see which FHA tier you qualify for.

Connect with FHA loan specialists who can:

• Calculate your exact rate at current credit score vs. improved score
• Analyze rent increases + home appreciation in your market
• Show break-even timeline for buying now vs. waiting
• Provide credit improvement strategies if waiting makes sense

For me, buying at 618 was the right decision—I’m building equity, locked in housing costs, and improving my credit for a future refinance. But every situation is different.

Run the numbers for your specific scenario before deciding.