Bad credit can feel like a locked door when you’re ready to buy a home. The good news is that the door isn’t sealed shut. Millions of buyers with credit scores below 620 close on homes every year, largely through government backed programs built for exactly this situation. So can you get a home loan with bad credit? In most cases, yes, but the loan you qualify for, the down payment you’ll need, and the rate you’ll pay will look different from what a borrower with strong credit gets.
This guide walks through which loan programs accept lower scores, what lenders check beyond your FICO number, what your monthly payment might realistically look like, and the steps that can put you in a stronger position before you apply.
What Counts as “Bad Credit” for a Mortgage
Credit scoring models like FICO range from 300 to 850. Generally, a score below 580 is considered poor, 580 to 669 is fair, and 670 and above is considered good to excellent. Mortgage lenders don’t use one single cutoff, though. Each loan program sets its own minimum, and individual lenders can add stricter requirements on top of that, known as overlays.
This matters because the answer to “can you get a home loan with bad credit” depends heavily on which range your score falls into. A 610 score opens far more doors than a 520 score, even though both are typically labeled as bad credit.
Can You Get a Home Loan With Bad Credit?
Yes, in most cases you can get a home loan with bad credit, primarily through government backed loan programs such as FHA, VA, and USDA loans. These programs were created in part to help borrowers who don’t meet the stricter standards of conventional financing. Some non-QM (non-qualified mortgage) lenders and portfolio lenders also work with damaged credit, though usually at a higher cost.
What changes with bad credit is not whether you can get a home loan, but the terms attached to it. Expect a larger down payment, a higher interest rate, and closer scrutiny of your income and debts.
Pros and Cons of Getting a Home Loan With Bad Credit
Before deciding whether to apply now or wait and rebuild your credit first, it generally helps to weigh the tradeoffs side by side.
Pros
- Homeownership may still be possible, even with a low score
- FHA loans accept scores as low as 500
- Government-backed loans reduce many of the barriers conventional financing imposes
- You may have the opportunity to refinance later once your credit improves
Cons
- Interest rates are typically higher than what a strong-credit borrower would receive
- Mortgage insurance costs add to your monthly payment
- Some score tiers require a larger down payment
- Fewer lenders are willing to work with lower scores, which can limit your options
Loan Options for Bad Credit Borrowers
Several mortgage programs are specifically structured to accommodate lower credit scores. Each has its own minimum score, down payment rule, and cost structure, so comparing them side by side helps clarify which path fits your situation.
FHA Loans
FHA loans, insured by the Federal Housing Administration, are typically the most accessible option when you’re asking whether you can get a home loan with bad credit. According to HUD’s Single Family Housing Policy Handbook, borrowers with a credit score of 580 or higher generally qualify for a 3.5% down payment. Borrowers with scores between 500 and 579 may still qualify but generally need a 10% down payment. Scores below 500 typically aren’t eligible for standard FHA financing.
FHA loans require mortgage insurance, including an upfront premium of about 1.75% of the loan amount and an annual premium that is usually paid monthly. Unlike conventional loans, FHA pricing doesn’t shift based on your exact credit score, which is why FHA is often more affordable than conventional financing for borrowers in the 580 to 660 range.
Keep in mind that individual lenders set their own minimum scores above the FHA floor, so a lender advertising a 620 minimum isn’t unusual even though FHA technically allows lower.
VA Loans
VA loans, guaranteed by the Department of Veterans Affairs, are available to eligible service members, veterans, and some surviving spouses. The VA itself doesn’t set a minimum credit score, but individual lenders typically require a score of around 580 to 620. VA loans generally don’t require a down payment or ongoing mortgage insurance, which makes them one of the more affordable paths for eligible borrowers with damaged credit.
USDA Loans
USDA loans support homebuyers in eligible rural and some suburban areas. Lenders typically look for a credit score of around 640, though exceptions exist for borrowers who can show strong compensating factors like a low debt-to-income ratio or a solid rental payment history. USDA loans generally require no down payment and carry lower mortgage insurance costs than FHA.
Non-QM and Portfolio Loans
Non-qualified mortgage (non-QM) loans are issued by lenders who set their own underwriting rules instead of following standard government or conventional guidelines. These loans can work for borrowers with recent bankruptcies, foreclosures, or self-employment income that’s hard to document. They typically come with higher interest rates and larger down payment requirements, so they’re usually considered after government backed options have been ruled out.
Conventional Loans With Compensating Factors
Conventional loans generally require a minimum credit score of 620. It’s technically possible to get a home loan with bad credit through a conventional program in rare cases where a lender applies manual underwriting, but this is far less common than FHA or VA financing at lower score ranges. Conventional loans also use risk-based pricing, so a lower score usually results in a noticeably higher rate and private mortgage insurance cost.
How Bad Credit Affects Your Mortgage Terms
Getting approved is only part of the equation. Bad credit typically changes the actual cost of the loan in a few specific ways.
Higher Interest Rates
Lenders price risk into your rate. A borrower with a 600 credit score will generally be offered a higher rate than a borrower with a 740 score on the same loan program, sometimes by a full percentage point or more depending on market conditions.
Larger Down Payment Requirements
Programs like FHA scale the required down payment to your credit score. A 580 score generally unlocks the 3.5% minimum, while scores between 500 and 579 usually require 10% down. A larger down payment reduces the lender’s risk and can sometimes offset a lower score in the approval decision.
Mortgage Insurance Costs
FHA loans require mortgage insurance regardless of your score, and for many borrowers who put down less than 10%, that insurance lasts for the life of the loan. Conventional loans use private mortgage insurance (PMI) that is priced based on your credit score and loan-to-value ratio, so bad credit usually means a higher PMI rate until you reach 20% equity.
What Lenders Look at Besides Your Credit Score
Credit score is one factor in a larger underwriting picture. Lenders generally also weigh:
- Debt-to-income (DTI) ratio – how much of your gross monthly income goes toward debt payments, including the new mortgage. FHA loans can generally accommodate a back-end DTI up to 43%, and sometimes higher with strong compensating factors.
- Payment history – consistent on-time payments over the past 12 to 24 months can carry real weight, even if your overall score is low.
- Employment and income stability – lenders typically want to see steady income, often two years of consistent employment or self-employment history.
- Cash reserves – savings left over after closing can serve as a compensating factor if other parts of your application are weaker.
- Recent credit events – bankruptcies, foreclosures, or late payments generally require a waiting period before you qualify, though the exact timeline varies by loan program.
This is part of why the question “can you get a home loan with bad credit” doesn’t have a single yes or no answer. Two borrowers with identical scores can get very different offers depending on their income stability and existing debt.
Can You Buy a Home With a 500, 550, 600, or 620 Credit Score?
Score requirements aren’t one-size-fits-all, and the exact tier your score falls into can determine which loans are open to you and how much you’ll need to put down. Here’s how each range generally plays out.
Can You Buy a House With a 500 Credit Score?
A 500 credit score sits at the lowest tier most lenders will consider. FHA loans generally set 500 as their absolute floor, and at that level, borrowers typically need a 10% down payment rather than the standard 3.5%. Many lenders add their own overlays above FHA’s minimum, so a 500 score usually means a smaller pool of lenders willing to work with you, often community banks, credit unions, or lenders that specialize in manual underwriting. VA and conventional loans are generally not available at this score level. If you’re wondering can you get a home loan with bad credit at 500, the honest answer is that it’s possible but limited, and you’ll want to shop specifically for lenders who confirm they originate FHA loans in the 500 to 579 range.
550 Credit Score
A 550 score still falls within FHA’s 500 to 579 tier, so the 10% down payment requirement generally still applies. This score range typically comes with a noticeably higher interest rate than the 580-plus tier, and DTI limits may be scrutinized more closely. Some lenders may also want to see a strong explanation and documentation for any past credit issues, along with stable income and reserves. Borrowers at 550 are often better served by spending a few months improving their score toward 580, since that threshold cuts the required down payment from 10% down to just 3.5%.
600 Credit Score
A 600 credit score opens up more of the mortgage market. At this level, most FHA lenders will offer the 3.5% down payment option since it clears the 580 threshold with room to spare. Some conventional lenders may also consider a 600 score, though 620 is more commonly cited as the standard conventional minimum, so pricing and approval odds are usually better through FHA at this score. VA loans also become more realistic at 600, since many VA lenders set their internal minimum around this level.
620 Credit Score
A 620 score is a meaningful threshold because it’s the most commonly cited minimum for conventional financing. At 620, borrowers generally have access to FHA, VA (where eligible), USDA (if income and location qualify), and conventional loans, giving them the most room to compare rates and terms. Conventional loans at 620 still carry loan-level price adjustments that raise the rate compared to higher-score borrowers, so FHA often remains competitive or cheaper on a monthly basis even though a 620 score technically qualifies for conventional financing.
Mortgage After Bankruptcy, Foreclosure, or Late Payments: Typical Waiting Periods
Past credit events generally require a waiting, or seasoning, period before you’re eligible for a new mortgage. These timelines vary by loan program and by the type of event, and lenders may shorten some waiting periods when a borrower can document extenuating circumstances such as a job loss or medical emergency.
| Credit Event | FHA | VA | Conventional |
| Chapter 7 Bankruptcy | 2 years from discharge | 2 years from discharge | 4 years from discharge |
| Chapter 13 Bankruptcy | 1 year of on-time plan payments, with court approval | 1 year of on-time plan payments, with court approval | 2 years from discharge, or 4 years from dismissal |
| Foreclosure | 3 years from completion | 2 years from completion | 7 years from completion |
| Short Sale | 3 years (waived if payments were current for 12 months prior) | 2 years | 4 years |
| Deed-in-Lieu of Foreclosure | 3 years | 2 years | 4 years |
These timelines are general guidelines rather than guarantees. Individual lenders can apply stricter overlays, and documentation requirements, such as bankruptcy court permission or proof of on-time trustee payments, generally apply regardless of the loan program.
Documents You’ll Need to Apply
Once you’ve been pre-qualified, lenders generally request a standard set of documents to verify your income, assets, and identity. Having these ready ahead of time can speed up underwriting.
- Government-issued photo ID
- Social Security number
- W-2 forms from the past two years
- Federal tax returns from the past two years (especially if self-employed)
- Recent pay stubs, typically covering the last 30 days
- Bank statements from the past two to three months
- Employment verification, including employer contact information
- Documentation of any additional income, such as alimony, bonuses, or rental income
- Explanation letters for credit issues, large deposits, or employment gaps, if requested
- Bankruptcy discharge paperwork or court approval letters, if applicable
Steps to Take Before You Apply
Preparing your finances before you submit an application generally improves both your approval odds and the terms you’re offered.
- Pull your credit reports from all three bureaus and check for errors. Incorrect information is more common than most people expect and disputing it can sometimes raise your score before you apply.
- Pay down revolving balances where possible. Credit utilization is a major scoring factor, and lowering balances can move your score in a matter of weeks.
- Avoid new credit inquiries in the months leading up to your application, since new accounts can temporarily lower your score.
- Save for a larger down payment to strengthen your file and potentially reduce your rate.
- Get pre-qualified with multiple lenders, since credit score minimums and overlays vary. A lender that declines you at one company may approve you at another.
- Document your income and assets thoroughly, especially if you’re self-employed or have irregular income.
- Make sure to factor in homeowners insurance when budgeting for your monthly payment, since lenders require active coverage before closing and it directly affects your overall housing affordability.
How to Improve Your Credit Before Applying
If you have time before you need to move, improving your score can meaningfully change your options. Generally, on-time payments, low credit card balances, and a longer credit history all support a higher score. Some borrowers spend six months to a year rebuilding credit before applying, which can shift them from the 500 to 579 FHA tier into the 580-plus tier, cutting their required down payment from 10% to 3.5%.
Working with a HUD-approved housing counselor is a free option worth considering. These counselors can review your credit report, help build a budget, and outline a realistic timeline for qualifying.
Common Mistakes to Avoid
Before applying for a mortgage, avoid these common mistakes that can reduce your approval chances or lead to less favorable loan terms.
- Assuming one lender’s “no” applies everywhere. Overlays differ significantly between lenders.
- Making large purchases or opening new credit accounts while your application is in process.
- Skipping pre-approval and only finding out about credit issues after making an offer on a home.
- Ignoring compensating factors like cash reserves or a low DTI that could offset a weaker score.
- Not accounting for the added cost of mortgage insurance when budgeting a monthly payment.
Frequently Asked Questions
What credit score is needed to get a home loan?
FHA loans generally accept scores as low as 500 with 10% down, or 580 with 3.5% down. Conventional loans typically require at least 620, and USDA loans usually look for around 640.
Can you get a home loan with bad credit and no down payment?
VA loans and USDA loans can generally be obtained with no down payment if you meet eligibility requirements, even with a lower credit score, though individual lenders still set their own minimum score thresholds.
Will bad credit always mean a higher interest rate?
In most cases, yes. Lenders price risk into the rate, so a lower score typically results in a higher rate than a borrower with strong credit would receive on the same loan program.
How long after bankruptcy can I get a home loan with bad credit?
Waiting periods vary by loan type and bankruptcy chapter, generally ranging from about one to four years, and can sometimes be shorter with documented extenuating circumstances.
Is it better to wait and improve my credit before applying?
It depends on your timeline and local housing market. If you’re within a lower score tier that requires a significantly larger down payment, spending a few months improving your credit could reduce your upfront cost. If you’re already comfortable with the terms available now, waiting may not offer a meaningful advantage.
Final Thoughts
So, can you get a home loan with bad credit? For most borrowers, the answer is yes, largely because of government backed programs like FHA, VA, and USDA loans that were designed with exactly this situation in mind. The tradeoff is generally a higher rate, a bigger down payment, or added mortgage insurance costs compared to what a borrower with strong credit would pay. Reviewing your credit report, understanding your DTI, and getting pre-qualified with more than one lender are practical steps that can clarify your real options rather than relying on assumptions about what bad credit rules out. Homeownership with bad credit is generally achievable. It just requires a clear-eyed look at the tradeoffs before you sign.
