How To Buy A House With Bad Credit | Loan Options 2025

Can I buy a house with bad credit?

Yes, you can buy a house with bad credit. While qualifying for low credit score home loans can be challenging, it’s definitely achievable.

Across the industry, the lowest credit score to buy a house is 500. Additionally, mortgages for bad credit usually come with higher interest rates to offset the risk of lending to borrowers with poor credit histories. 

Here’s what you should know when buying a home with bad credit.

In this article (Skip to...)

• Lowest credit score to buy a house
• Low credit score home loans
• Getting mortgages for bad credit
• Bad credit mortgage lenders
• FAQ

What is the lowest credit score to buy a house?

Credit scores are typically categorized into tiers—excellent, very good, good, fair, and poor—which can impact your ability to qualify for a mortgage.

FICO credit score ranges:

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

The lowest credit score to buy a house typically starts at 500 for FHA loans with a higher down payment, while conventional loans often require a minimum score of 620. Knowing the lowest credit score to buy a house can help you assess your options and take steps to improve your financial standing.

Home loans for bad credit

If you're trying to buy a house with bad credit, low credit score home loans may just be the solution you need. Among them, FHA loans are a popular choice for borrowers with poor credit histories.

When comparing mortgages for bad credit, consider factors like credit score requirements, interest rates, and monthly payments to find the best fit for your financial situation.

1. FHA loans (500 credit score)

An FHA mortgage is a government-backed loan guaranteed by the Federal Housing Administration. It’s a popular option for first-time home buyers, especially for those with low credit scores or bad credit. The credit score needed for FHA loans is 500 with a 10% down payment or 580 with just 3.5% down.

• The credit score needed for FHA loans start at 500, with a 10% minimum down payment or scores below 580.
• First-time home buyers with bad credit scores may face higher interest rates, but FHA loan rate increases are generally lower than those for conventional loans.
• All FHA loans include upfront and annual mortgage insurance premiums (MIP), which increase your monthly mortgage payment.

FHA loans don’t use risk-based pricing or LLPA, which makes them a great option for first-time home buyers seeking low credit score home loansFHA loans often presenting a more cost-effective route for bad-credit borrowers.

2. VA loans (580 credit score)

VA loans help veterans, active-duty service members, and eligible military borrowers buy a home with no down payment and no ongoing mortgage insurance. Backed by the Department of Veterans Affairs, they offer some of the lowest interest rates available.

• VA loans have no official minimum credit score, but most lenders prefer 580 to 620.
  Borrowers with lower credit scores get rates similar to those with good credit.
• All VA loans require a one-time funding fee, which most borrowers roll into closing costs.

For those who qualify, VA loans are among the best mortgage loans for low credit scores, with no money down and flexible terms.his type of mortgage offers lenient qualifying credit requirements and no risk-based pricing adjustments.

3. USDA loans: (640 credit score)

Despite higher credit score requirements, USDA loans can still be a great option for low credit score home loans. They require no down payment and offer competitive interest rates for buyers in rural areas.

• Applicants need a minimum 640 credit score to qualify.
• The home must be in a qualifying rural area.
• Household income must be 115% or less of the area median income (AMI).
• All USDA loans require a 1% upfront guarantee fee and a 0.35% annual fee, increasing the loan’s cost.

If you're wondering how to get a mortgage with bad credit, USDA loans could be an option. Backed by the U.S. Department of Agriculture, they offer an affordable path to homeownership for qualifying rural borrowers.

4. Conventional loans: (620 credit score)

Conventional loans are among the most popular types of mortgage, but for borrowers with a low credit score, they often come with higher interest rates and fees. Such costs can make them less affordable for buying a home with bad credit.

• A credit score requirement of 620 is typically needed.
• Paying less than the minimum down payment of 20% requires paying private mortgage insurance (PMI).
• Loan-level price adjustments (LLPAs) vary based on credit score and loan-to-value ratio (LTV).

As LTV rises and credit score falls, fees increase—for example, a 700 score with 20% down incurs a 1.25% LLPA, while a 640 score with 10% down faces 2.75%. While conventional mortgages favor good credit borrowers, they’re still an option for those with bad credit, though FHA loans often offer a more affordable path. 

How to get a home loan with bad credit

Getting approved for a low credit score home loan may seem tough, but there are ways to improve your chances. Lenders don’t just look at your credit score—they consider your full financial picture. If your income and savings are strong, your loan application is more likely to get approved.

1. Get mortgage preapproval

Getting preapproved helps you understand your budget and makes you more attractive to sellers. It also gives lenders a chance to flag areas where you can improve your credit. Be upfront about your finances—some lenders offer programs to help buyers with lower scores.

2. Consider a Co-Signer

If your low credit score home loan application is denied, a co-signer can help. Their stronger credit and financial stability can increase your approval odds. However, bear in mind that your credit is also at risk. Some lenders average both credit scores, while others use the lower one, which could impact your interest rate.

3. Explore specialized mortgage programs

Government-backed loans like FHA, VA, and USDA loans can make buying a house with bad credit easier. The credit score needed for FHA loans is as low as 500 with a 10% down payment or 580 with just 3.5% down.

VA and USDA loans often require no down payment and have flexible credit requirements. Additionally, some lenders specialize in mortgage loans for bad credit.

4. Save for a larger down payment

A bigger down payment reduces a lender’s risk and makes it easier to qualify for a bad credit mortgage loan. It can also help lower your interest rate. Even an extra few percentage points can make a difference in approval and affordability.

Need more help? Our guide to down payment assistance programs covers state-specific options and resources available through the U.S. Department of Housing and Urban Development (HUD).

5. Leverage home equity

If you’re struggling with cash-out refinancing due to bad credit, a home equity line of credit (HELOC) can provide a flexible solution. By tapping into home equity, homeowners can access funds for renovations, debt consolidation, or other financial needs—even when a traditional cash-out refinance seems out of reach.

Credit-building tips for first-time home buyers

Improving your credit score is important when applying for a low credit score home loan. These strategies can help strengthen both your financial profile and mortgage application.

• Regularly check your free credit report from TransUnion, Experian, and Equifax through annualcreditreport.com to catch and address any inaccuracies that could potentially damage your credit score.
• Actively dispute any errors or incorrect information with credit bureaus, especially those related to past foreclosures or collection accounts that might impact your DTI (debt-to-income) ratio.
• Implement a "Pay for Delete" strategy when dealing with collection accounts to remove negative marks that could hinder your loan approval chances.
• Reduce your debt-to-income ratio and credit utilization by paying down existing debts and maintaining credit card balances below 30% of your credit limit.
• Establish a consistent payment history by making all loan and credit card payments on time, preferably through automatic payment setups.

Consistently applying these techniques can gradually improve your credit score and improve your chances of qualifying for low credit home loans.

Bad credit mortgage lenders

A less-than-perfect FICO score doesn't limit your mortgage options. Many underwriters specialize in working with borrowers whose credit scores are around or below 600. While low credit score home loans may come with different terms, our guide to the best bad credit mortgage lenders will help you explore all available lending opportunities.

FAQs about low credit score home loans

Check your eligibility for low credit score home loans

It’s possible to buy a house with bad credit. 

You’ll likely pay a higher mortgage rate, but you could get on the homeownership ladder now and start building equity. And you can always refinance to a lower rate later once your credit improves. 

Want to find out whether you qualify for one of the many home loans for bad credit? Consulting with a mortgage loan officer about your options is free and will help you determine which bad credit mortgage program is best for you.