Susan Taylor
Three years before I left the mortgage industry, I watched a couple walk out of a loan officer’s office believing they’d never own a home. Their credit scores were in the low 500s, they had a medical collection from two years prior, and they’d been turned down twice. What the loan officer didn’t tell them, and what I wish I’d caught them in the hallway to say, is that they were actually approvable. They just needed the right loan type and about four months of preparation.
That gap, between what lenders say and what’s actually possible, is why I’m writing this.
The short answer to “can I get a mortgage with bad credit?” is: probably yes, but the details matter enormously. Your credit score is one factor, not a verdict. The loan type, your down payment, your debt-to-income ratio, and even the lender you walk into all have more influence over the outcome than most people realize.
What “Bad Credit” Actually Means to a Mortgage Lender
First, let’s get specific, because “bad credit” means different things depending on who’s asking.
In mortgage terms, anything below 620 is generally considered subprime territory for conventional loans. Scores from 580 to 619 put you in a tough spot for most standard products but can still qualify for government-backed loans. Below 580, your options get narrower fast, though they don’t disappear entirely.
What most people don’t realize is that the score a mortgage lender sees is usually different from the free score you checked on Credit Karma last Tuesday. Lenders pull a tri-merge report, which means they get scores from all three bureaus (Equifax, Experian, and TransUnion), and they use the middle score of the three, not the highest. I’ve seen borrowers walk in confident they were at 610 and find out their middle score was 571. That difference can change your loan options completely.
Also: lenders don’t just look at the number. A 580 with one old collection that’s been paid is a very different risk profile than a 580 with recent missed payments and an active delinquency. The context of your credit history matters.
The Loan Types That Actually Help Bad-Credit Borrowers
Helpful resource: Home Buying Kit for Dummies is a top-rated option for this. (As an Amazon Associate this site earns from qualifying purchases.)
This is where I’d spend the most time if I were sitting across the table from you.
FHA loans are the most common path for people with credit challenges, and for good reason. The Federal Housing Administration guarantees these loans, which means the lender takes on less risk, so they’re willing to lend to borrowers with lower scores. As of July 2026, FHA guidelines technically allow scores as low as 500, though you’ll need a 10% down payment at that level. If you’re at 580 or above, you can qualify with 3.5% down. That’s a meaningful difference if you’re working with limited savings.
The catch is mortgage insurance. FHA loans require an upfront mortgage insurance premium (usually 1.75% of the loan amount, rolled into the loan) plus an annual premium that gets paid monthly. On a $280,000 loan, that’s nearly $4,900 upfront and somewhere around $150 to $200 per month on top of your payment. That’s real money, and it doesn’t go away until you’ve paid down to 80% loan-to-value and refinance into a conventional loan. Some borrowers stay stuck paying it for years because they don’t know to ask.
VA loans are, honestly, the best deal in American mortgage lending if you qualify. No down payment, no private mortgage insurance, and the VA doesn’t set a minimum credit score (though individual lenders usually require at least 580 to 620). If you’re a veteran, active-duty service member, or eligible surviving spouse, this should be your first call. Period.
USDA loans cover rural and some suburban areas and also offer no down payment options. Credit minimums are typically around 640 for the automated approval process, though manual underwriting can sometimes go lower.
Conventional loans with manual underwriting are possible but rare below 620. If you do find a lender willing to manually underwrite, they’ll scrutinize every aspect of your file: your payment history on rent and utilities, your employment stability, your savings reserves. It’s more work, but it can happen.
Here’s a comparison that might save you a few phone calls:
| Loan Type | Minimum Credit Score | Down Payment | Mortgage Insurance | Best For |
|---|---|---|---|---|
| FHA (580+) | 580 | 3.5% | Required (upfront + monthly) | Most bad-credit borrowers |
| FHA (500-579) | 500 | 10% | Required (upfront + monthly) | Very low scores with savings |
| VA | No official minimum (lenders typically 580+) | 0% | None | Eligible veterans/military |
| USDA | 640 (automated); lower possible manually | 0% | Required (lower than FHA) | Rural/suburban buyers |
| Conventional | 620 | 3% to 20% | Required if < 20% down | Stronger profiles |
| Non-QM / Portfolio | Varies (often 500+) | 10% to 20%+ | Varies | Self-employed, unique situations |
What I’d Actually Do If My Credit Were in Bad Shape Right Now
Who's getting rich from your mortgage? · Garys Economics on YouTube
I’m going to be honest with you: if your score is below 580 and you’re trying to close on a home in the next 60 days, that’s going to be hard. Not impossible, but hard. The more realistic question is often “what’s the fastest path to approvable?”
Here’s a rough sequence that I’ve seen work, based on actual cases I processed over my career:
Step 1: Pull your actual credit reports. Not just your scores. The full reports, free at AnnualCreditReport.com. You’re looking for errors (which are more common than you’d think, roughly one in five reports has an error according to FTC data), outdated collections past the seven-year mark, and any accounts that don’t belong to you. Disputing a legitimate error once got a borrower of mine from 564 to 601 in six weeks.
Step 2: Deal with recent delinquencies before anything else. Recency matters more than people expect. A collection from four years ago hurts less than a payment you missed last month. If you have current late payments, get current.
Step 3: Pay down revolving credit. Credit utilization (how much of your available credit card limit you’re using) is one of the fastest levers. If you have a card with a $5,000 limit and a $4,200 balance, you’re at 84% utilization. Getting that below 30% can add meaningful points in a single billing cycle. Below 10% is even better.
Step 4: Don’t open new credit. Every hard inquiry dings your score a little, and new accounts lower your average account age. Both matter when you’re trying to qualify.
Step 5: Talk to a HUD-approved housing counselor. I know that sounds like something I’m supposed to say, but I mean it. HUD-approved housing counselors offer free or low-cost sessions, and they can look at your full financial picture without trying to sell you a loan. I’ve referred people there who came back two months later genuinely ready to buy, where before they weren’t.
Step 6: Talk to multiple lenders. This is important. Lender overlays are a real thing. The FHA might allow a 580, but a specific bank might require 620 for their own internal reasons. Credit unions and smaller mortgage banks often have more flexibility than big-box lenders. Shopping around with bad credit feels uncomfortable, but multiple mortgage inquiries within a short window (usually 14 to 45 days depending on the scoring model) are typically treated as a single inquiry for scoring purposes.
Here’s an example of how this can play out:
Rosa, a reader who emailed me after finding this site: Score at 562, two medical collections, high utilization. → Spent four months paying down two credit cards, disputing one incorrect late payment, and letting a recent inquiry age. Score moved to 589. → Closed on an FHA loan with 3.5% down. Her rate was higher than someone with a 720 score would pay, but she owns her home.
Marcus, a veteran: Score at 601, one old repossession from 2021, stable income for three years. → Lender denied him on conventional. → Applied for a VA loan through a lender that does manual underwriting. → Approved. No down payment, no PMI.
These aren’t unicorn outcomes. They’re just people who knew what to apply for.
The Real Cost of a Lower Credit Score
I want to spend a minute on this because it’s genuinely important and often glossed over.
A lower credit score doesn’t just affect whether you get approved. It affects your interest rate, and that affects your monthly payment and the total amount you pay over the life of the loan. As of July 2026, the spread between what a borrower with a 760 score pays versus someone with a 620 score can easily run one full percentage point or more on a conventional loan. On a $300,000 mortgage at 30 years, one percentage point is roughly $175 more per month and over $60,000 more in total interest paid.
That’s not a small difference. Which is part of why, if your score is in that 600 to 620 range, it can be worth waiting three to six months to push it above 640 or 660, even if you’re eager to buy. I know that’s a frustrating thing to hear. But the math is pretty unforgiving.
The Federal Housing Finance Agency (FHFA) publishes data on how credit scores interact with loan performance and pricing, which is part of why lenders price so differently based on score tiers. The cutoffs aren’t arbitrary. They’re actuarial.
Sources
- FHA Single Family Housing Policy Handbook (HUD.gov): Official FHA loan requirements including credit score minimums and mortgage insurance rules.
- Federal Housing Finance Agency (FHFA): Data on loan performance, pricing, and conventional loan standards.
- AnnualCreditReport.com: Official free credit report access authorized under federal law.
- Consumer Financial Protection Bureau (CFPB) Mortgage Credit Report Resources: Plain-language explanations of credit scoring and disputing errors.
- FTC Consumer Report (2021): “In Brief: The Credit Report Study” (referenced figure: approximately 1 in 5 reports contains an error that affects credit).
If you’re in research mode right now and want to get your head around the full home-buying process, the HUD-approved housing counselor locator is free and genuinely useful. For people who learn better from a book, something like The Home Buying Bible or a solid first-time buyer guide on Amazon (the site may earn a commission on purchases) can help you build context before your first lender conversation. Walking in knowing what questions to ask changes everything.
This article is for educational purposes only and does not constitute financial or mortgage advice. Mortgage rates change daily and vary by lender, loan type, credit profile, and property details. Consult a HUD-approved housing counselor (find one at hud.gov) or licensed mortgage professional for guidance specific to your financial situation.
Recommended Resources
Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.
- First-Time Home Buyer: The Complete Playbook (~$18), The #1 Amazon bestseller in homebuying, covers down payment strategies, mortgage pre-approval, and avoiding rookie mistakes.
- 100 Questions Every First-Time Home Buyer Should Ask (~$17), Nearly a million copies sold, covers every question to ask your lender, agent, and inspector before signing anything.
