Can You Get a Mortgage with Bad Credit?

Yes. Buyers with credit scores well below 700 close on homes every year. But "bad credit" means different things to different loan programs. A 580 score that makes you ineligible for a conventional loan may be enough for an FHA loan with a 3.5% down payment. A 500 score may still qualify you with a larger down payment. The key is knowing which programs apply to your specific score range.

Lenders don't just look at your score, though. They also look at your debt-to-income ratio, your payment history, your down payment, and your recent credit activity. A 600 score with a clean payment history over the last 12 months looks very different to an underwriter than a 600 score with recent late payments. So the number alone doesn't tell the whole story.

What Lenders Actually Look At

Most borrowers focus only on their credit score. That's understandable. But credit score is really a summary of several factors: how often you pay on time, how much of your available credit you're using, how long your accounts have been open, and whether you've applied for new credit recently. Each of those factors can be worked on. And improving just one or two of them can move your score enough to change your loan options.

It's also worth knowing that lenders pull all three credit bureau scores (Equifax, Experian, and TransUnion) and use the middle score for qualification. So if your three scores are 571, 590, and 614, your qualifying score is 590. That matters when you're close to a program threshold.

Loan Programs That Work for Lower Credit Scores

The right loan for a low-credit buyer depends on more than just the score. It also depends on whether you're a veteran, where the property is located, and how much you can put down. Below is a breakdown of the main programs that accept lower credit scores, along with what each one requires.

FHA Loans: The Most Accessible Path

For buyers with scores below 620, FHA loan options are often the most realistic starting point. The program is backed by HUD's FHA program, and it accepts lower scores precisely because the government guarantees part of the loan. With a 580 or higher score, you can put down as little as 3.5%. If your score falls between 500 and 579, you'll need at least 10% down.

One thing FHA loans do require is mortgage insurance, both upfront and monthly. This adds to your payment. So while FHA gets you in the door at a lower score, it's not free. The gap between a 580 score and a 640 score can mean a meaningful difference in what you pay over the life of the loan. Getting approved and being well-positioned are two different things, and it's worth understanding both before you commit.

VA, USDA, and Other Options

If you've served in the military, the VA loan program has no official credit score minimum and no down payment requirement. Individual lenders often set their own score floors, but VA loans are generally more flexible than conventional loans for lower-credit borrowers. Because the VA guarantees part of the loan, lenders take on less risk and can approve borrowers they might otherwise decline.

For buyers in eligible rural or suburban areas, the USDA loan program also requires no down payment. Income limits apply, and the property has to be in a USDA-eligible area. But if you qualify, it's one of the few zero-down options available to non-veterans. Beyond these government programs, putting down 20% or more can also help offset a lower credit score. A large down payment reduces lender risk, so some lenders will work with a 580 or 600 score if the borrower puts significant equity in up front. And if a family member with good credit is willing to co-sign, that can improve approval odds. Just know that a co-signer shares responsibility for the debt, which is a real commitment for both parties.

Steps to Strengthen Your Position Before You Apply

Getting pre-approved with bad credit is possible. But going in with a stronger profile means better terms, a lower rate, and fewer surprises. These steps won't fix everything overnight. However, even a few months of consistent action can shift your score and your approval odds significantly.

Start with Your Credit Reports

The FTC has found that one in five consumers has at least one error on their credit reports that can be corrected after disputing it. That's a significant number. Errors can include accounts that aren't yours, late payments reported incorrectly, or balances that haven't been updated after a payoff. You can pull your reports for free at AnnualCreditReport.com. Review all three bureaus carefully. If you spot something wrong, dispute it directly with that bureau in writing. Corrections can take 30-45 days but can move your score noticeably.

This is exactly the kind of detail that gets missed when buyers try to navigate the process alone. Disputing a $400 collection account that isn't yours could be the difference between a 571 qualifying score and a 593 qualifying score. That gap can open or close loan programs entirely.

Reduce Your Debt-to-Income Ratio

Your credit score and your debt-to-income ratio are two separate hurdles. You need to clear both. Most lenders want your total monthly debt payments to stay below 43% of your gross income. So if you earn $5,000 a month, your total monthly debt payments (including the future mortgage) should stay under $2,150. Paying down a car loan or credit card balance before you apply can drop your DTI and improve your approval odds, even if your credit score doesn't move at all.

This is worth knowing because it also gives you a faster path. Raising a credit score takes time. Paying off a small debt can happen in weeks.

Build Your Score Over Time

Three things move a credit score more than anything else: paying every bill on time, reducing your credit card balances, and not opening new accounts. Avoid applying for new credit in the months before you buy. Each application creates a hard inquiry on your report. Multiple inquiries in a short period signal risk to lenders. Also, keep your credit utilization below 30% of your available limit on each card. Paying down balances below that threshold often produces a score bump within one to two billing cycles.

"Most buyers come to us focused entirely on their credit score. But I often find that their DTI is the bigger obstacle. We've helped people get approved not by raising their score but by paying off one car loan that was pushing their monthly debt load too high. The score got them in the conversation. The DTI got them approved."

Reed Letson, Owner, Elevation Mortgage

For Colorado buyers, the Colorado Housing and Finance Authority (CHFA) offers down payment assistance programs that can help lower-credit borrowers close with less cash out of pocket. Florida has similar state-backed assistance programs. Ask your lender which state programs you might pair with an FHA loan, because those combinations can make a meaningful difference for buyers who have the income to carry a mortgage but not the savings for a large down payment.

Understanding what lenders actually look at when reviewing your application goes well beyond your credit score. That knowledge helps you show up better prepared.

Waiting Periods After Major Credit Events

A foreclosure or bankruptcy doesn't permanently bar you from getting a mortgage. But it does start a clock. FHA rules set specific waiting periods based on the type of credit event, and those periods matter. Going to a lender before the waiting period ends will result in a denial. So knowing where you stand on the timeline is the first step.

What to Do During the Waiting Period

The wait isn't wasted time. It's actually the best window to fix the habits that led to the credit event. Pay every bill on time. Pay down balances. Build savings. And avoid new derogatory marks at all costs. A new late payment or collection during the waiting period can reset the clock or create a new barrier. Lenders look at the arc of your credit story, not just the event itself.

Conventional loan waiting periods are typically longer than FHA rules. For example, a conventional loan often requires a seven-year wait after a foreclosure. So for buyers who have gone through foreclosure or bankruptcy and are close to the end of their FHA waiting period, the FHA route is almost always the better starting point. Once you're in the home and your credit has recovered further, refinancing into a conventional loan later becomes an option.

Common Mistakes Buyers Make with Bad Credit

We see the same patterns repeat with low-credit buyers. These aren't character flaws. They're just gaps in information that a better process would have caught earlier.

Applying with Only One Lender

More than 70% of homebuyers apply with only one lender, per CFPB research. That's a mistake for any buyer, but it's especially costly for buyers with credit challenges. Different lenders have different overlays on top of program minimums. One lender may decline a 600 score while another approves it with the same loan type. Shopping matters.

Ignoring DTI While Focusing on the Score

Buyers spend months raising their credit score, then get denied because their debt-to-income ratio is too high. Both factors matter. Paying down a card or loan can solve the DTI problem faster than any credit-building strategy.

Opening New Accounts Before Closing

A new car loan or credit card application right before a mortgage closing can drop your score, raise your DTI, and in some cases kill the deal entirely. New credit activity gets flagged during the final underwriting review. Don't open anything new after you go under contract. Wait until after you get the keys.