How To Buy A House With Bad Credit | Loan Options 2026

Yes, you can buy a house with bad credit, but expect stricter loan requirements and higher mortgage rates. Some mortgage programs permit scores as low as 500 if you meet down payment and other financial requirements. Because lenders view bad credit as higher risk, they raise interest rates to offset that risk, which makes comparing your options an important step. 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?

The lowest credit score needed to buy a house generally starts at 500 for an FHA loan if you make a larger down payment, while most conventional loans require at least a 620 score. Lenders classify FICO scores into tiers—poor, fair, good, very good, and excellent—and these categories affect which loan programs you can use and how much you’ll pay in interest.

FICO credit score ranges:

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

Home loans for bad credit

If you’re trying to buy a house with bad credit, low-credit-score home loans might be the solution you need. Among these, FHA loans are a popular choice. However, when comparing mortgages for bad credit, consider factors like credit score requirements, interest rates, and monthly payments to choose the best option for your financial situation.

1. FHA loans (500 credit score)

2. VA loans (580 credit score)

3. USDA loans: (640 credit score)

4. Conventional loans: (620 credit score)

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 entire financial situation. 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 appealing to sellers. It also gives lenders a chance to identify areas where you can improve your credit. Be honest about your finances. Some lenders offer programs to assist 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, remember that your credit is at risk as well. 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 can make buying a house with bad credit easier. The minimum credit score for FHA loans is as low as 500 with a 10% down payment or 580 with just 3.5% down. VA and USDA loans usually don’t require a down payment and have more flexible credit requirements. Additionally, some lenders specialize in mortgage loans for bad credit.

4. Save for a larger down payment

A larger down payment lowers a lender’s risk and makes it easier to qualify for a bad credit mortgage loan. It can also help reduce your interest rate. Even a few extra percentage points can impact 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 offer a flexible option. By tapping into home equity, homeowners can get funds for renovations, debt consolidation, or other financial needs, even if a traditional cash-out refinance isn’t an option.

Credit-building tips for first-time home buyers

Improving your credit score is important when applying for a low-credit-score home loan. Consistently applying these techniques can gradually improve your credit score and increase your chances of qualifying for low-credit home loans.

• 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 handling collection accounts to remove negative marks that might affect 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.

Bad credit mortgage lenders

A less-than-perfect FICO score doesn’t restrict your mortgage options. Many underwriters specialize in assisting borrowers with credit scores around or below 600. While low-credit-score home loans may involve different terms, our guide to the best bad-credit mortgage lenders will help you discover all your lending options.

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.