Buy a Home with Bad Credit
What loan options work and what your score actually controls
A low credit score doesn’t mean homeownership is off the table.
But it does change which loans are available and what you’ll pay.
This article is for buyers who’ve been told their credit is the problem.
You’ll learn which loan programs work for lower scores and what each one requires.
You’ll also find out how much a lower score costs you in real dollars over time.
And you’ll see which steps actually move the needle before you apply.
In This Article
Can You Buy a Home with Bad Credit?
Yes. Buyers with credit scores well below 700 close on homes every year. The question isn’t whether it’s possible. It’s which programs apply to your specific score range.
“Bad credit” means different things depending on the loan type. A 580 score may rule you out of a conventional loan but still qualify you for FHA loan options with just 3.5% down. A 500 score can still qualify for FHA financing, though you’ll need at least 10% down. The program you can access depends entirely on where your score lands.
Lenders don’t just look at your score, though. They also review your debt-to-income ratio, your recent payment history, your down payment, and your credit activity over the past year. A 600 score with 12 clean months of payments looks very different to an underwriter than a 600 score with a late payment from last quarter. The number alone doesn’t tell the whole story.
One detail that often surprises buyers: lenders pull scores from all three bureaus, Equifax, Experian, and TransUnion, and use the middle score for qualification. If your three scores are 571, 590, and 614, your qualifying score is 590. That detail matters when you’re close to a program threshold. Knowing what lenders look at when reviewing your application helps you focus your energy where it actually counts.
Loan Programs That Accept Lower Credit Scores
The right loan for a lower-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. Here’s a breakdown of the main programs and what each one requires.
| Loan Type | Min. Credit Score | Min. Down Payment | Key Requirement |
|---|---|---|---|
| FHA | 500 (10% down) or 580 (3.5% down) | 3.5% with 580+ score | Owner-occupied property |
| VA | No official minimum; lenders often set 580+ | None required | Eligible veteran, active duty, or surviving spouse |
| USDA | No official minimum; lenders often set 640+ | None required | USDA-eligible area; household income limits apply |
| Conventional | 620 (Fannie Mae/Freddie Mac minimum) | 3–5% | Stronger overall credit profile generally required |
FHA Loans: The Most Accessible Path for Lower Scores
For buyers with scores below 620, FHA is usually the most realistic starting point. The program is backed by the federal government through HUD, and it accepts lower scores because the government guarantees part of the loan. With a 580 or higher score, you can put down as little as 3.5%. Below 580, you’ll need at least 10%.
FHA loans do require mortgage insurance, both upfront and monthly. That adds to your payment. So while FHA gets you in the door at a lower score, it comes at a cost. Getting approved and being well-positioned are two different things. The gap between a 580 and a 640 can mean a real difference in what you pay over the life of the loan.
One thing worth knowing: the program minimums above are federal floors. Individual lenders often set their own minimums on top of them. A lender might require 600 or 620 on an FHA loan even though the FHA itself allows 580. Working with a broker who shops multiple lenders is often the most direct path to finding one whose requirements match your actual score.
VA and USDA Loans
If you’ve served in the military, the VA loan program has no official credit score minimum and no down payment requirement. Individual lenders set their own floors, often around 580, but VA loans are generally more flexible for lower-credit borrowers. Because the VA guarantees part of the loan, lenders take on less risk and can approve situations they’d 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 must fall in a USDA-eligible zone. If you qualify, it’s one of the few zero-down options available to non-veterans.
A larger down payment can also offset a lower score on conventional loans. Putting down 20% or more reduces lender risk, and some lenders will approve a 580 or 600 score that they’d otherwise decline when the borrower brings more equity upfront. If you’re weighing how much to put down, reviewing your down payment options alongside your credit situation can help you find the right combination. A co-borrower with strong credit works similarly, but they take on full legal responsibility for the loan. Both parties should understand that before agreeing to it.
State Programs Worth Asking About
Colorado buyers may be able to pair an FHA loan with down payment assistance through the Colorado Housing and Finance Authority, known as CHFA. Their programs are designed for buyers who have the income to carry a mortgage but haven’t built up a large down payment. Florida buyers have similar options through the Florida Housing Finance Corporation. Ask your lender which state programs might stack with your loan type before you assume you need to cover everything out of pocket.
What This Means for Your Situation
Which program you qualify for depends on your score, but lender overlays can narrow or expand those options beyond what the program minimums suggest. If one lender declines you, that doesn’t mean the program itself is unavailable. Your score may qualify with a different lender who sets a lower overlay. A mortgage broker who works with multiple lenders, rather than a single bank’s product lineup, can often find options that a single-lender search would miss.
The Real Cost of a Lower Credit Score
Most buyers know a lower score means a higher rate. Fewer stop to add up what that difference actually costs over time.
According to myFICO data from August 2025, the difference in total interest paid between the highest and lowest credit score tiers on a $250,000 30-year mortgage is about $60,980. That gap comes from a rate difference of roughly 1.5 percentage points across tiers. The monthly difference looks manageable. The 30-year total doesn’t.
That number is also why waiting a few months to raise your score before applying can be worth it, even when you’re ready to move. Moving from a 600 to a 640 won’t close the full gap, but it can mean thousands of dollars saved over the life of the loan. The right question isn’t just “can I get approved right now?” It’s “what will this cost me over 30 years, and is there a faster path to a better rate?”
In our experience working with Colorado buyers, most people underestimate how much a 20 to 40 point score improvement can change their options. Sometimes it’s the difference between FHA and conventional. Sometimes it’s a lower mortgage insurance rate. Either way, the math is almost always worth looking at before you commit to an application.
How to Strengthen Your Position Before You Apply
Getting approved with a lower score is possible. But going in with a stronger profile means better terms, a lower rate, and fewer surprises at closing. These steps won’t fix everything overnight. Even a few months of consistent action, though, can shift your score and your approval odds significantly.
Pull Your Credit Reports First
A Federal Trade Commission study found that one in five consumers has at least one error on their credit reports, a finding the CFPB has cited in its own consumer guidance. Errors can include accounts that aren’t yours, late payments recorded incorrectly, or balances that weren’t updated after a payoff. Pull all three reports for free at AnnualCreditReport.com. Review each one carefully. If you find something wrong, dispute it directly with that bureau in writing. Corrections can take 30 to 45 days but can move your score enough to change your loan options entirely.
We see this play out more often than most buyers expect. A disputed 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 programs entirely.
Watch Your Debt-to-Income Ratio
Your credit score and your debt-to-income ratio are two separate hurdles. You need to clear both. Most programs prefer your total monthly debt payments to stay below 43% of your gross income. If you earn $5,000 a month, your total monthly debt, including the future mortgage payment, should generally stay under $2,150. Paying down a car loan or a credit card balance before you apply can drop your DTI and improve your odds, even if your credit score doesn’t move at all.
That’s actually one of the faster paths available to buyers. Raising a credit score takes time. Paying off a smaller debt can happen in weeks.
Credit Utilization and Timing
Three things move a score more than anything else: paying every bill on time, reducing credit card balances, and not opening new accounts. Keep your utilization below 30% of the available limit on each card. Paying a balance below that threshold often produces a score bump within one to two billing cycles. That timing matters if you’re targeting a specific application month.
Avoid applying for any new credit in the 90 days before you apply for a mortgage. Each application creates a hard inquiry. Multiple inquiries in a short window signal risk to lenders, even when the amounts are small.
“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
How a Credit Report Error Blocked an FHA Loan in Colorado Springs
A buyer in Colorado Springs came to us with a 594 middle credit score and a medical collection on her report. Another lender had told her to wait a full year before applying.
When we reviewed her credit reports, we found the collection had been reported twice. It appeared separately from both the original creditor and a collection agency. We helped her dispute the duplicate entry directly with the bureau.
After the correction, her score moved to 611. We closed her FHA loan within 60 days of that first conversation. The underlying debt hadn’t changed. The way it was being reported had.
Waiting Periods After Major Credit Events
A foreclosure or bankruptcy doesn’t permanently bar you from getting a mortgage. But it starts a clock. FHA rules set specific waiting periods after each type of credit event. Applying before the period ends will result in a denial. Knowing where you stand on the timeline is the first step toward planning your path back to homeownership.
| Credit Event | FHA Waiting Period | Notes |
|---|---|---|
| Foreclosure | 3 years from completion date | Extenuating circumstances may shorten to 1 year in rare cases |
| Chapter 7 Bankruptcy | 2 years from discharge date | Re-established credit and good payment history required |
| Chapter 13 Bankruptcy | 1 year into repayment plan | Court approval required; lender must also approve the situation |
| Short Sale or Deed-in-Lieu | 3 years from completion date | Same treatment as foreclosure under most FHA rules |
Conventional loans typically require longer waiting periods than FHA. After a foreclosure, a conventional loan often requires a seven-year wait. So for buyers who are near the end of an FHA waiting period, FHA is almost always the better starting point. Once you’re in the home and your credit has continued to recover, refinancing into a conventional loan later is an option.
The waiting period isn’t wasted time. It’s actually the best window to rebuild the habits that contributed to the credit event. Pay every bill on time. Pay down balances. Build savings. A new late payment or collection during the waiting period can restart the clock or create a new barrier entirely. Lenders look at the arc of your credit story, not just the event itself. Colorado and Florida buyers working through a waiting period may also find it helpful to connect with a credit education resource to map out a realistic score-building timeline before approaching a lender.
Run the Numbers Before You Start Shopping
Our first-time buyer tools let you estimate your payment, check affordability based on your income, and compare loan options side by side — before you ever talk to a lender.
Open the First-Time Buyer ToolsCommon Mistakes to Avoid
Applying with Only One Lender
A 2015 CFPB study found that about 77% of homebuyers applied to only one lender. That’s costly for any buyer, but it’s especially costly for buyers with credit challenges. Different lenders set different overlays above program minimums. One lender may decline a 600 score while another approves it under the same loan type. Shopping multiple lenders matters more, not less, when your credit is lower.
Focusing on the Score While DTI Goes Unchecked
We see buyers spend months raising their credit score and then get denied because their debt-to-income ratio is too high. Both factors matter equally. In many cases, paying down a single account can solve the DTI problem faster than any score-building strategy. Check both numbers before you apply.
Opening New Accounts Before Closing
A new car loan or credit card application after going under contract can drop your score, raise your DTI, and in some cases end the deal during final underwriting. Lenders flag new credit activity right before closing. Don’t open anything new after you’re under contract. Wait until you have the keys.
Questions to Ask Your Lender
- What is the minimum credit score you accept for FHA loans, and do you have overlays above the program floor?
- Given my current score and DTI, which loan programs am I eligible for right now?
- Are there steps I could take in the next 60 to 90 days that would open better loan options for me?
- Have you worked with buyers who’ve had a foreclosure or bankruptcy, and how do you handle those timelines?
- What down payment assistance programs are available in my area that could pair with my credit profile?
- If I get approved now versus waiting six months to improve my score, what does the rate and monthly cost difference look like?
Find Out What Actually Drives Your Approval
Credit score is just one piece. Income, debt, assets, and loan type all factor in. Our approval guide breaks down what lenders actually look at and what you can do about it.
See What Affects Your ApprovalFrequently Asked Questions
Yes, but only through an FHA loan and only with at least 10% down. Scores below 500 don’t qualify for FHA financing. Some lenders also set their own minimums above 500, so a score of 510 or 520 may still result in a denial at certain lenders even though it technically meets the FHA floor. Shopping multiple lenders matters a lot at this score range.
It depends on what’s dragging the score down. If high credit card balances are the issue, paying them down can show results within one to two billing cycles. If the issue is late payments or collections, you’re building a payment track record, which typically takes six to twelve months to show meaningful improvement. Disputing errors is often the fastest path, since corrections can happen in 30 to 45 days.
It can improve approval odds, especially if the co-borrower has a strong credit profile and low debt. But the co-borrower takes on full legal responsibility for the loan. If you miss payments, it affects their credit too. Both parties should understand that before agreeing to the arrangement.
The fastest levers are disputing errors on your credit reports and paying credit card balances below 30% of each card’s limit. Both can produce results within a single billing cycle. Avoid opening any new accounts while you’re working toward your application, and make sure every existing account stays current throughout the process.
You’ll likely qualify for an FHA loan, but lender overlays become a real factor at this range. Some lenders won’t go below 600 or 620 on FHA even though the program allows 580. Working with a mortgage broker who compares multiple lenders gives you the best shot at finding one whose requirements fit your score, rather than being limited to one lender’s internal policy.
