You can get a mortgage with bad credit through FHA (580+ score), VA, or USDA loans, but expect higher rates and stricter requirements.
September 9, 2025
While a low credit score presents challenges, you can still qualify for a mortgage even with a FICO score under 620.
You'll likely face higher interest rates and stricter requirements, but homeownership remains achievable with the right approach and preparation. This article will guide you through the process of getting approved for a mortgage with bad credit.
If your FICO credit score is under 620, lenders typically consider you a higher-risk borrower. This means you should be prepared for consequences like higher interest rates, larger down payment requirements, or stricter lending criteria.
However, don't let bad credit discourage you from pursuing homeownership. "If the person has the financial ability to obtain a mortgage even with a subpar credit score and there is a need for housing, then yes, they should," says Stephanie Amedee, branch manager at Semper Home Loans, Inc.
"By purchasing a home, they can build equity in themselves while they continue to build up a positive credit history," she adds.
Start by pulling your credit score and credit report to understand exactly where you stand. This information will help you determine which mortgage options to pursue and identify areas for improvement.
Review Your Credit Report Thoroughly
Don't just glance at your score—carefully examine your full credit report. You might be pleasantly surprised by what you find.
"I have found that often people believe their credit is worse than it really is because they have not looked at their credit report," informs Anthony Kirlew, real estate agent at EXP Realty.
"Sometimes there are errors that can be removed, old collections that can be paid, and credit cards that can be paid down to an acceptable percentage, which can result in improving credit scores," Kirlew advises.
Calculate Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio indicates what percentage of your monthly income goes toward debt payments. Here's how to calculate it:
Now add your potential mortgage payment ($1,500) to see your new DTI: 50%
Understanding DTI Requirements
Most lenders prefer a DTI under 36%, though Fannie Mae allows up to 50% in some cases. In our example, a 50% DTI might be too high to qualify. If this happens, consider paying down existing debt before applying for a mortgage to improve your approval odds.
If your FICO credit score is better than fair (670+), you may want to look at conventional mortgages.
They often involve less paperwork than their government-backed counterparts, are more customizable, and allow you to drop your mortgage insurance once you reach 20% equity. However, if your score is under that threshold, you might want to explore these mortgage options for bad credit:
FHA Loans
A Federal Housing Administration (FHA) loan is a popular choice, especially for first-time homebuyers. You can qualify for an FHA mortgage with a 580 credit score and a 3.5% down payment. If you can put 10% down, you may be eligible for financing with a credit score as low as 500.
While lenient borrower eligibility requirements can help you get into a home sooner, they come with a price. You'll have to carry mortgage insurance for 11 years if you put 10% down, or for the life of the loan if your down payment is less than that, explains Amedee.
VA Loans
A loan from the Department of Veterans Affairs (VA) could be right for you if you're a veteran or active-duty military.
Grant R. Menard, president of Onshore Mortgage LLC, explains, "The VA loan program doesn't have a specific minimum credit score. Instead, individual lenders determine their own credit score standards based on their lending criteria. In most cases, however, a score of 620 or higher is typically needed to qualify."
USDA Loans
If you want to live in the country, a home loan from the US Department of Agriculture (USDA) could be a good fit. "USDA loans can be suitable for rural buyers with limited income. [Borrowers] typically will need a minimum credit score of 620 [to qualify]," advises Menard.
Private Lender Loans
If you prefer to avoid government-backed mortgages, some private lenders offer home loans to borrowers with poor credit. Consider these key factors:
Maximize your approval chances by completing these preparation steps before applying:
Improve Your Overall Financial Situation
Your credit score is just one piece of the financial puzzle that your lender will look at when evaluating your mortgage application. Your lender will also consider your:
Gather Documentation
Your lender will require proof of your financial situation. Find all of the following documents and put them in a folder so they're ready to go:
While requirements can vary from lender to lender, you'll generally need to submit two months' worth of pay stubs and bank statements and two years' worth of tax returns. Self-employed borrowers may face stricter documentation requirements.
You might also want to write and submit a letter explaining your negative credit history. If you have a compelling reason, such as an illness or family emergency, your lender may be more willing to accept your low credit score.
Get Pre-Approved
Before you officially apply for a mortgage, it's worth getting pre-approved. During the pre-approval process, the lender will evaluate your financial situation (and may require submission of the above documents).
If you get pre-approved, you'll learn your:
A pre-approval makes you a stronger borrower. Real estate agents will be more willing to show you homes, and your offers will get taken more seriously because there's a good chance (but not a guarantee) that you'll get approved for a home loan.
If your score is too low to qualify for a mortgage right now, or you want to secure a home loan with a better interest rate, there are many steps you can take to improve your score, such as:
Pro tip: Don't open any new credit accounts once you've started the home-buying process. Any changes to your credit profile could cause your lender to adjust or revoke your mortgage approval.
Use Credit-Building Tools
If your credit score is very low (or non-existent), you may be able to repair or establish your credit score by obtaining and responsibly using a secured credit card.
With a secured credit card account, you make an upfront deposit, which becomes your credit limit. If you use your card and pay your bill on time, you can graduate to a traditional credit card account with a higher limit and get your deposit back.
Menard suggests signing up for Experian Boost. The tool connects to your bank account, detects on-time payments for utility, cell phone, and other bills, and bumps up your score as a result.
Get Professional Help
You may want to contact a non-profit credit counseling agency if your credit situation feels overwhelming. A credit counselor can walk you through the process of getting out of debt and improving your score.
You might also want to become an authorized user of a loved one's credit card, suggests Menard. Doing so can help you establish a good credit score through their history of creditworthiness.
Track Your Progress
Your efforts may take a while to pay off, so periodically checking your credit report and score is crucial to determining if you're in a better position to buy a house. You can get a free credit report from each of the credit bureaus (Experian, Equifax, and TransUnion) each year, says Menard.
Be Patient
Building your credit is a long game. You may be able to get some quick wins, but you likely won't see a drastic improvement overnight. If you follow the best practices listed above consistently over time, your score will improve.
Getting a mortgage with bad credit is possible, but requires preparation and realistic expectations. Start by checking your credit and exploring loan options like FHA, VA, or USDA loans. Improve your financial standing, gather documentation, and get pre-approved to strengthen your application.
While you'll likely face higher rates initially, homeownership can help you build equity and improve your credit over time.
1. What credit score do I need to buy a house?
You can qualify for an FHA loan with a credit score as low as 580 (with 3.5% down) or 500 (with 10% down). VA and USDA loans typically require 620+, though individual lenders may have different standards.
2. How much more will I pay with bad credit?
The difference between a 620 and 760 credit score is roughly 0.50% in interest rates, which translates to about $50,000 more in interest over a 30-year mortgage. However, rates vary by lender and loan type.
3. Should I wait to improve my credit before buying?
It depends on your situation. If you need housing and can afford the payments, buying now allows you to build equity while improving your credit. However, if you can significantly boost your score in 6-12 months, waiting might save you money long-term.
Laura has been a freelance writer since 2018. Her work primarily focuses on managing your money, navigating your career, and running a successful business. Her words have been featured in U.S. News & World Report, Fortune Recommends, The New York Post, USA Today, and many other publications.
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