• It is possible to get a mortgage with a low credit score, though it often results in higher interest rates.
• Government-backed programs like FHA, VA, and USDA loans offer options for borrowers with lower credit.
• Improving your chances of approval can involve checking your credit, reducing debt, and saving for a larger down payment.

Having a low credit score can make buying a home more challenging. However, it doesn’t necessarily make it an impossibility. Your credit score is a crucial factor that lenders use to evaluate their risk. However, the common misconception that having bad credit automatically disqualifies any particular borrower is false.

Several mortgage programs, including FHA, VA and USDA loans, may provide an opportunity to purchase a home for borrowers with lower credit scores. Understanding how lenders evaluate applications, available loan options and how to strengthen your odds can help you learn how to get a mortgage with bad credit and determine whether buying a home now makes financial sense.

Can you get a mortgage with bad credit?

In many cases, it’s possible to get a mortgage with bad credit. However, it’s important to note that a lower credit score usually results in a higher interest rate, larger down payment requirement or stricter eligibility standards. While a lower credit score can be a limiting factor, lenders typically evaluate more than just that single metric. Additional financial health indicators, such as income, debt-to-income ratio (DTI), savings, employment history and down payment amount, can all influence a lender’s decision. 

What is considered bad credit for a mortgage?

While “bad” isn’t an official credit score rating, lenders most often use the FICO scoring model, with the following ranges, to make lending decisions. 

• Below 580: Poor 
• 580 to 669: Fair
• 670 to 739: Good
• 740 to 799: Very good
• 800 and higher: Excellent

Lenders generally classify lower credit score holders as being higher risk borrowers. Because of the perceived risk, they typically charge those borrowers higher interest rates or impose stricter approval requirements on them. However, how much a particular score matters can vary by lender and mortgage program. 

What credit score do you need to get a mortgage?

Credit score requirements vary by loan type and lender. While applicants with higher credit scores often qualify for lower interest rates and better loan terms, several programs can help borrowers with lower credit scores obtain a mortgage loan. 

Conventional loans

Conventional home mortgages are privately funded loans that often follow the guidelines of Fannie Mae or Freddie Mac, though not always. Non-conforming conventional loans allow lenders to set their own underwriting rules, provided they’re legal. In either case, these mortgages aren’t subject to minimum credit score requirements. However, because of perceived risk elements, borrowers with higher credit scores generally see better rates and terms. 

FHA loans

Borrowers can qualify for an FHA loan with a credit score as low as 500 if they put 10% down on the property. Borrowers with scores of 580 or above can qualify with a down payment of 3.5%, and using FHA funding requires paying for mortgage insurance in addition to monthly loan and escrow payments.  

VA loans

VA home loans are available to military members, veterans and surviving spouses, and have flexible credit score requirements set by individual lenders. Credit score requirements are often lower than those of other loan types, due to the VA backing. These loan types generally require no down payment and aren’t subject to mortgage insurance requirements. 

USDA loans

USDA loans are available to prospective homeowners in certain rural areas and assist buyers with low to moderate incomes. The USDA doesn’t have minimum credit score requirements. However, providing additional verifications may be required through most approved lenders for those with scores below 640. 

How lenders evaluate mortgage applicants with bad credit

A credit score is only one factor lenders consider when determining mortgage eligibility. Most providers evaluate a borrower’s overall financial profile to determine risk. 

Credit history

Lenders review your overall credit history, including payment history, collection records, bankruptcies and foreclosures, to assess how you’ve managed debt in the past. 

Income

Your income amount helps lenders determine whether you can generally afford to add a mortgage payment to your monthly budget. Having a higher income usually means you can qualify for a larger loan. 

Employment history

Having a stable employment history can help demonstrate consistent earning ability and overall financial stability.

Debt-to-income ratio (DTI)

DTI compares your monthly debt payments to your gross monthly income. Having a higher debt level leaves less income available for housing costs, potentially reducing the approval odds. 

Assets and savings

Money you have set aside to commit to a down payment or show as a cash reserve can signify financial responsibility to the lender. Making a larger down payment can lower monthly payments and potentially qualify you for a better interest rate. 

How to improve your chances of getting approved

While there are no guarantees that every applicant will get approved for a mortgage, there are some steps you can take to boost your odds. 

Check your credit reports

Before applying, review copies of your credit reports from each of the three credit reporting bureaus (Experian, Equifax and TransUnion). Check for errors and old or unrecognized information and investigate each instance. If found, you can dispute errors and request corrections, which may increase your score. 

Pay bills on time

Consistently paying bills by their due dates, especially credit accounts, can help increase and maintain your credit score over time. 

Reduce credit card balances

Reducing credit card balances can improve both your credit utilization ratio and your credit score.

Nick Avila, founder of United Debt Relief, says this about practical ways to improve your mortgage approval odds: “Start with credit utilization, because it has no memory — get card balances under 30% of limits, ideally under 10%, and your score can respond within one or two billing cycles.”

Pay down existing debt

Having a lower overall debt level can improve your DTI and increase your borrowing capacity in the eyes of a mortgage lender.

Avoid applying for new credit

Hard inquiries on your credit report affect your score and can negatively influence a mortgage lender’s decision. 

Increase your savings

Building savings demonstrates financial stability and can provide funds for a down payment or emergency cash reserve, both of which can help your approval odds.

Build a larger down payment

Having a larger down payment reduces lenders’ risk and may improve your loan options and lower your payments. 

Get preapproved before house hunting

Mortgage preapproval can help you understand how much house you may be able to afford and identify potential issues that could affect your final approval before getting attached to a particular house. 

How a larger down payment can help

You can strengthen your mortgage application by including provisions for a significant down payment. Making a larger down payment may reduce the lender’s perceived risk and demonstrate your willingness to share that risk. It can also provide several financial benefits, including:

• Lowering your loan amount: The larger your upfront payment is, the less you’ll finance overall.
• Potentially improving your approval odds: Lender may perceive borrowers with larger down payments more favorably. Additionally, financing less may qualify for better rates and terms. 
• Reducing your monthly payments: A smaller loan balance generally results in lower monthly mortgage payments and less interest paid over the life of the loan. 

Should you wait to improve your credit before buying?

While getting a mortgage with bad credit is often possible, the question may be whether it’s worth it to wait and improve your credit first. For some borrowers, buying now makes sense. For others, it may be better to wait. Here are the factors to consider: 

Reasons to buy now

• Suitable loan options available: FHA, VA and USDA loans may provide good-enough alternatives if you qualify now. 
• Housing market considerations: If housing prices in your area are increasing, buying now could help control overall costs. 
• Opportunity to become a homeowner sooner and build equity: Buying now can improve long-term equity growth. 
• Potential home appreciation: Increasing property values can add to your equity. 

Reasons to wait

• Higher borrowing costs: If you can realistically improve your credit score, you could experience lower borrowing costs later. 
• Fewer loan options: Because loans for bad credit are limited, you could open up additional borrowing options. 
• Larger monthly payments: Paying higher rates can equate to substantially higher mortgage payments.  
• Potential need for mortgage insurance: The requirement to pay mortgage insurance premiums increases costs.

The table below, based on data from the Consumer Financial Protection Bureau, highlights how your credit score can affect borrowing costs. In this example, the home is priced at $400,000 and assumes a 30-year term with a 10% down payment. 

Credit Score	Potential loan rates	Loan interest paid (first 5 years)
625	6.125% to 8.875%	$156,687
700	5.875% to 8.125%	$102,246

Mortgage programs that may help borrowers with bad credit

Several programs exist to help borrowers obtain a mortgage loan despite having a lower credit score. 

• FHA loans: Government-backed loans that allow some borrowers to qualify with scores as low as 500. 
• VA loans: Available to eligible military members, veterans and surviving spouses, often featuring lower credit requirements and no down payment.
• USDA loans: May provide low-cost financing for rural homebuyers with low- to moderate-income levels. 
• State and local homebuyer assistance programs: Many states and municipalities offer grants, loans or down payment assistance for eligible buyers.
• HUD-approved housing counseling resources: Housing counselors can help buyers understand their home-buying options, budgets and requirements.

Risks of getting a mortgage with bad credit

Before jumping in, it’s important to understand the potential risks and costs associated with getting a mortgage with bad credit, which can include: 

• Paying higher interest rates than those with a higher score.
• Making higher monthly payments due to higher rates and potential PMI costs. 
• Having greater total interest costs over the life of the loan.
• Experiencing potential affordability concerns. Be sure to evaluate the total cost of owning a home beyond just the monthly payment amounts. 

Common mistakes to avoid

Regardless of your credit score, there are a few common mistakes to avoid before purchasing a home. 

• Avoid applying for a mortgage without checking your credit first. 
• Be sure to address any affordability concerns by understanding the full cost of homeownership. 
• Take on no new debt before closing on the home. 
• Avoid the temptation to drain your savings to make a larger down payment.
• Focus on the bigger picture, including total cost, instead of only on obtaining loan approval. 

Bottom line

Having bad credit presents challenges when applying for a mortgage. However, it doesn’t automatically disqualify many borrowers from purchasing a home. Lenders generally evaluate more than just your credit score when determining your overall qualifications, and several mortgage programs are available to offer assistance in various ways. Regardless, before applying or counting yourself out, review your credit, understand your options and make sure the cost of homeownership fits comfortably within your budget.

How to get a mortgage with bad credit FAQs

Can you get a mortgage with bad credit?

Many borrowers can get a mortgage despite having bad credit because many lenders also consider factors beyond credit score to determine eligibility. FHA, VA and USDA loans often provide the vehicle, and state and local grants and programs can also be beneficial for the purpose.  

What credit score is needed to buy a house?

There is no single, absolute credit score requirement for buying a house. Eligibility based on credit score varies by program and lender, with 500 being the lowest allowed score for FHA loans. In general, obtaining a mortgage loan with a lower credit score typically means paying higher rates and having fewer borrowing options. 

Can I get a mortgage with a 600 credit score?

A credit score of 600 may qualify you for several mortgage programs, including some FHA loans. Approval will also depend on factors such as income, DTI, credit utilization, employment history and down payment amount.

Do FHA loans require good credit?

FHA loans are meant to help borrowers who may not qualify for conventional financing. They generally feature more flexible credit requirements, though having a lower credit score often requires making a larger down payment.

Will a larger down payment help me qualify?

Committing to making a larger down payment reduces the lender’s risk, lowers the loan amount and may help you qualify for a particular loan type. A larger down payment can also mean lower monthly payments and reduced overall borrowing costs.

Should I improve my credit before buying a house?

While improving your credit may help you qualify for lower interest rates and better loan terms, some borrowers may already qualify for a mortgage program that fits their needs. In cases where developing equity earlier outweighs the potential additional costs of qualifying with a lower score, it may make sense to buy earlier rather than waiting. 

How can I improve my chances of mortgage approval?

There are several ways to improve your chances of approval before applying for a loan, including reviewing your credit reports, paying bills on time, reducing overall debt, avoiding new credit accounts and building your savings. Increasing your down payment and obtaining preapproval before house hunting may also boost your chances of approval.