Buying a house with bad credit is harder, but it is not impossible. Many Americans purchase homes with credit scores well below the range traditional advice focuses on, by using government-backed loan programs, larger down payments, and honest preparation. This guide explains what lenders actually look at, which loan options allow lower scores, and the concrete steps that improve your chances of approval — without scams or false promises.
What Counts as Bad Credit for a Mortgage?
Credit scores for mortgages most commonly use FICO scores, which range from 300 to 850. In broad terms, scores below about 580 are often described as poor, 580 to 669 as fair, and 670 and above as good, though every lender sets its own standards. Your score is only part of the picture. Lenders also review your income stability, debt-to-income ratio, employment history, savings, and recent negative events such as bankruptcies or foreclosures, which come with mandatory waiting periods for most loan programs.
Before you apply anywhere, pull your free credit reports from AnnualCreditReport.com and check for errors. Incorrect late payments, accounts that are not yours, or debts reported twice are more common than most people expect, and disputing legitimate errors can help your score and your application.
Loan Options That Allow Lower Credit Scores
FHA Loans
Loans insured by the Federal Housing Administration are the most well-known path for buyers with weaker credit. Under longstanding FHA guidelines, borrowers with a credit score of 580 or higher can generally qualify with as little as 3.5% down, while scores from 500 to 579 typically require 10% down. Individual lenders can impose stricter overlays, so shop more than one FHA lender. FHA loans require mortgage insurance premiums, both upfront and annual, which add to cost but make approval possible for many first-time buyers. The home must be your primary residence and meet FHA property standards.
VA Loans
Eligible veterans, active-duty service members, and some surviving spouses can use VA loans, which have no down payment requirement in most cases and no ongoing private mortgage insurance. The VA itself does not set a single minimum credit score, but most lenders look for scores around 620 or higher in practice. If you have VA eligibility, this is usually one of the strongest options to explore first.
USDA Loans
USDA loans serve buyers in eligible rural and some suburban areas who meet income limits. They offer zero down payment for qualified borrowers. Again, the program guidance is more flexible than lender practice, and many lenders prefer scores in the low-to-mid 600s for streamlined approval, with manual review possible below that in some cases.
Conventional Loans and Portfolio Lenders
Conventional loans backed by Fannie Mae and Freddie Mac generally require higher scores, often 620 or above, and charge more for lower scores through pricing adjustments and private mortgage insurance. Some community banks and credit unions keep loans on their own books — portfolio loans — and can be more flexible if you have a relationship, strong income, and a larger down payment, even with a blemished history.
For context on pricing across programs, see our guide to the best mortgage rates in 2026 and our explainer on how to refinance a mortgage, which becomes relevant once you own the home and your credit improves — many buyers purchase with a workable loan now and refinance into a better rate later.
Steps That Actually Improve Your Approval Odds
- Save a larger down payment. More money down reduces lender risk and, for FHA borrowers in the 500 to 579 range, is required. It also lowers your monthly payment and total interest.
- Lower your debt-to-income ratio. Pay down credit card balances and avoid new debts before applying. Lenders typically want your total monthly debts, including the new housing payment, to stay within program limits that often center around the low-to-mid 40 percent range, with flexibility for strong compensating factors.
- Show stable income and reserves. Two years of steady employment history, plus savings left over after closing (reserves), strengthen an application significantly.
- Clean up your credit, legitimately. Pay on time every month, keep credit card utilization low, and do not close old accounts unnecessarily. Building even six to twelve months of clean history changes lender conversations.
- Get a full pre-approval, not just a pre-qualification. A lender who has verified income, assets, and credit gives you and sellers real confidence on what you can afford.
- Consider a co-borrower carefully. A spouse or partner with stronger credit and income can help, but they take on full responsibility for the debt — discuss it openly.
Be wary of anyone promising to erase accurate negative information or sell you a new credit identity. Those schemes are illegal and will sink your application. Legitimate credit counseling through a nonprofit agency can help you build a payoff plan. If your debts include high-interest balances, understanding how personal loans work can help you compare consolidation carefully — but taking on new debt right before a mortgage application usually hurts more than it helps, so talk to a lender first.
Extra Costs and Honest Tradeoffs
Buying with bad credit usually costs more. Expect higher interest rates than a borrower with a 740 score would receive, plus mortgage insurance on FHA and low-down-payment conventional loans. That does not automatically make buying a mistake — renting also costs money and builds no equity — but it does mean you should run the full monthly payment including taxes, homeowners insurance, and mortgage insurance, and keep an emergency fund after closing. If the payment leaves you house-poor, waiting six to twelve months to raise your score and savings may be the smarter purchase.
Also plan for closing costs, which often range from about 2% to 5% of the loan amount, though they vary by state and lender. Ask about lender credits, seller concessions, and state or local down payment assistance programs — many states and cities offer grants or forgivable second loans for first-time buyers who complete a homebuyer education course.
Frequently Asked Questions
What is the lowest credit score to buy a house?
With FHA financing, scores as low as 500 can be eligible with 10% down, and 580 with 3.5% down, subject to lender approval and other requirements. In practice, many lenders set higher minimums.
How long after bankruptcy can I buy?
Waiting periods vary by program and bankruptcy chapter. FHA commonly requires two years after a Chapter 7 discharge in many cases, with shorter paths in some Chapter 13 situations — confirm current guidelines with a lender, as exceptions depend on documented circumstances.
Should I wait until my credit is perfect?
You do not need perfect credit, but there is a real payoff to crossing key thresholds such as 580 and 620. If you are close to the next threshold, a short, focused improvement period can save you thousands in rate and insurance costs.
Key Takeaways
- FHA loans are the main route for lower scores: 580+ with 3.5% down, 500 to 579 with 10% down, plus mortgage insurance.
- VA and USDA loans offer zero-down options for those who qualify, though lenders often prefer scores in the 600s.
- A larger down payment, lower debts, stable income, and cash reserves materially improve approval odds.
- Check your reports for errors, avoid credit repair scams, and compare at least three lenders.
- Buy only when the full monthly payment fits your budget with an emergency fund intact.