How to Get Approved for a Mortgage With Bad Credit

You may still qualify for a mortgage with bad credit through government-backed FHA, VA, or USDA loans, though you can expect higher rates and stricter terms. Learning how to get approved for a mortgage with bad credit starts with one fact: a low credit score makes buying a home harder, not impossible. You can still qualify with a FICO score under 620.

You'll likely face higher rates and stricter requirements, but homeownership stays within reach with the right preparation. A good first move is to compare mortgage lenders so you can see which programs and rates you may qualify for.

One shift is worth knowing early. Conventional loans no longer hinge on a fixed 620 credit-score floor for files run through automated underwriting — more on that below.

If your FICO credit score is under 620, lenders typically treat you as a higher-risk borrower. That can mean higher interest rates, larger down payments, or stricter criteria.

Still, under 620 is a general benchmark, not a hard conventional cutoff. A lower score may limit your options, but many borrowers still qualify.

FICO scores run from 300 to 850, and lenders group them into the ranges below.

Follow four steps: assess your credit, explore your loan options, prepare your application, and improve your score. Each one is covered below.

Step 1: How Do You Assess Your Current Credit Situation?

Start by pulling your credit score and full credit report so you know where you stand. This helps you decide which loan options to pursue.

You can get a free credit report from each bureau once a year at AnnualCreditReport.com. Review it carefully — you might be surprised by what you find.

"Often people believe their credit is worse than it really is because they haven't looked at their report," says Anthony Kirlew, a real estate agent at eXp Realty. "Errors can be removed, old collections paid, and cards paid down — often improving scores."

Calculate your debt-to-income ratio. Your debt-to-income (DTI) ratio is the slice of your monthly income already spoken for by debt payments before a mortgage is added. Here's how to calculate it:

• Add up all monthly debt payments: $1,000

• Divide by monthly gross income: $5,000

• Your DTI: 20%

• Now add a potential mortgage payment ($1,500): your new DTI is 50%

Many lenders prefer a DTI under 36%, though automated underwriting can allow higher ratios in some cases. In our example, 50% might be too high to qualify.

If that happens, pay down existing debt before you apply. For a full walkthrough, see our guide to how to calculate your debt-to-income ratio.

Step 2: What Mortgage Options Exist for Bad Credit?

Your score shapes which loans fit best, but several programs work for lower scores. The table below compares the main options at a glance.

How Do Conventional Loans Work With Bad Credit?

Conventional loans are customizable and let you drop mortgage insurance once you reach 20% equity. Think of automated underwriting as a screening tool that reviews your whole financial picture instead of rejecting everyone below one number.

Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Product Advisor no longer enforce a fixed 620 credit-score floor for conforming loans. They now use a holistic credit-risk assessment, per Fannie Mae's Selling Guide announcement SEL-2025-09. A 620 score still shows up as a common lender overlay.

Loan limits matter too. In most areas, conforming loans can finance a one-unit home up to $832,750 in 2026. That cap rises to about $1.25 million in high-cost areas, according to the Federal Housing Finance Agency.

Can You Get an FHA Loan With Bad Credit?

Yes. An FHA loan is a common choice, especially for first-time homebuyers (see our first-time homebuyer guide).

You can qualify with a 580 score and 3.5% down, or with a score as low as 500 if you put 10% down, per HUD's Handbook 4000.1. Those flexible requirements come with a cost: FHA mortgage insurance runs for 11 years with 10% down, or for the life of the loan if you put down less.

How Do VA Loans Work for Lower Scores?

A VA loan can fit if you're a veteran or active-duty military. It is an option that requires no down payment and no private mortgage insurance for eligible borrowers, according to the VA. It is also one of the more flexible zero-down-payment home loans.

"The VA loan program doesn't set a specific minimum credit score," says Grant R. Menard of Onshore Mortgage LLC. "Individual lenders set their own standards, but a score of 620 or higher is typically needed."

Who Benefits From USDA Loans?

A home loan from the U.S. Department of Agriculture (USDA) can suit rural, lower-income buyers. Automated approval typically calls for a score around 640, though roughly 600 may be possible through manual underwriting.

"USDA loans can be suitable for rural buyers with limited income," adds Menard. "Borrowers typically need a minimum credit score of 620 to qualify."

What About Private Lender Loans?

Some private lenders offer conventional loans to borrowers with lower credit. Keep these points in mind:

• Higher costs: a lower score usually means a higher rate — see how much bad credit can cost below.

• Shopping strategy: compare loan costs from several lenders to find a competitive deal.

• Future refinancing: once your credit improves, refinancing may secure a lower rate.

How Much Does Bad Credit Cost You?

Picture two buyers who each borrow $300,000. The one with a 760 score qualifies for a lower rate and a smaller monthly payment. The buyer at 610 pays more each month and much more interest over 30 years.

The CFPB explains that your credit score affects the mortgage rate you're offered. Even a small rate difference can add up over a long loan. The table below shows the general relationship.

Step 3: How Do You Prepare for the Mortgage Application?

Strengthen your file before you apply. Your credit score is just one piece of the puzzle — lenders also weigh your income, down payment, assets, and other debts.

What Down Payment Assistance Is Available?

Down payment assistance can close the gap between what you've saved and what you need. Many programs help first-time buyers — see our guide to first-time homebuyer grants and assistance. Common forms include:

• Grants: funds that don't have to be repaid.

• Second mortgages: a separate loan layered on top of your primary mortgage.

• Forgivable loans: balances erased if you stay in the home long enough.

• Deferred loans: repayment delayed until you sell or refinance.

• Matched savings: programs that match what you set aside.

Many programs are reserved for first-time buyers or primary residences, and requirements vary by state.

Can a Co-Signer Help You Qualify?

A creditworthy co-signer can add their income and assets to your application. That extra support may help you qualify or reach better terms.

Keep in mind the co-signer is legally responsible for the payments if you fall behind, so the arrangement affects their credit too.

What Documents Do You Need?

Your lender will require proof of your finances: pay stubs, bank statements, and tax returns (plus supporting forms like W-2s and 1099s). Requirements vary by lender.

You'll generally need two months of pay stubs and bank statements and two years of tax returns. Self-employed borrowers may face stricter documentation. You can also submit a letter explaining any negative credit history.

Why Get Pre-Approved?

Before you officially apply, it's worth getting pre-approved. A pre-approval tells you your maximum purchase price, projected rate, and approximate monthly payment. It can strengthen your application in a competitive market.

Shopping several lenders won't hurt your score much. Multiple mortgage inquiries made within roughly a 45-day window count as a single inquiry, according to the CFPB.

Step 4: How Do You Improve Your Credit Score?

A few habits can raise your score over time:

• Pay your bills on time. Payment history is about 35% of your FICO score, per myFICO.

• Keep balances low. A common guideline is to use 30% or less of your available credit.

• Apply for new credit only when necessary.

Pro tip: Don't open any new credit accounts once you've started the home-buying process.

What If Automated Approval Says No?

When automated underwriting declines you, a manual underwriter can take a second look — much like a human reviewer stepping in after a computer says no. They weigh compensating factors like verified rent history and cash reserves that automated systems may miss.

For example, the USDA allows a score of roughly 600 through manual underwriting rather than the ~640 automated approval typically expects.

How Do Credit-Building Tools Help?

If your score is very low or non-existent, a secured credit card used responsibly can help you establish credit. You might also consider Experian Boost, which may help some users add eligible on-time utility and phone payments to their Experian file, which can affect certain scores.

You can also contact a non-profit credit counseling agency, or become an authorized user on a trusted person's card. Building credit is a long game — track your progress and stay patient.

This guide is most useful if you fit one of these profiles:

Scores 500–579

FHA financing may work with a 10% down payment.

Scores 580–619

FHA is available at 3.5% down, and some conventional options open via automated underwriting.

Scores 620 and Up

You'll likely have broader conventional choices.

Veterans and Active Military

VA loans offer no down payment and no PMI.

Rural or Lower-Income Buyers

USDA loans may fit your situation.

Next steps to consider:

• Pull your free reports at AnnualCreditReport.com and dispute any errors.

• Calculate your DTI and pay down balances where you can.

• Learn how to choose the right mortgage lender.

• When you're ready, review and compare your mortgage options to see which programs fit your profile.

What credit score do I need to buy a house?

You can qualify for an FHA loan with a score as low as 580 (3.5% down) or 500 (10% down). VA and USDA programs are typically lender-set and higher; see the loan options above for details and sources.

How much more will I pay with bad credit?

A lower score usually means a higher rate, which can add to your interest costs over a 30-year loan. The exact difference depends on your score, loan type, and lender.

Should I wait to improve my credit before buying?

It depends on your situation. Buying now lets you build equity while you improve your credit. If you can boost your score meaningfully in 6–12 months, waiting might save you money long-term.

What is the current minimum credit score for a mortgage?

FHA allows scores as low as 500, VA is lender-set, and USDA is typically around 640. Conventional loans use 620 as a benchmark, but there's been no fixed automated-underwriting floor since late 2025 — see the mortgage options above.

Can a co-signer help me get a mortgage with bad credit?

Yes. A creditworthy co-signer can lend their income and credit strength to your application, but they share legal responsibility for the payments.

This article relies on secondary authoritative sources rather than proprietary BestMoney research. We used the Federal Housing Finance Agency, the Fannie Mae Selling Guide (SEL-2025-09), HUD, the Consumer Financial Protection Bureau, myFICO, the U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture, plus commentary from mortgage professionals Anthony Kirlew and Grant R. Menard.

We did not have first-party BestMoney survey data on bad-credit mortgages for this piece; that data gap has been flagged for our editorial team.

• Federal Housing Finance Agency — 2026 conforming loan limit values

• Fannie Mae Selling Guide — announcement SEL-2025-09

• HUD Handbook 4000.1 — FHA credit and down payment requirements

• Consumer Financial Protection Bureau — credit score, mortgage rate, and inquiry guidance

• myFICO — what's in your credit score

• U.S. Department of Veterans Affairs — VA home loans

• U.S. Department of Agriculture Rural Development — USDA loans

Getting a mortgage with bad credit is possible with preparation and realistic expectations. Start by checking your credit and exploring FHA, VA, or USDA options.

Remember that conventional loans no longer hinge on a fixed 620 floor, as covered above. Improve your finances, gather your documents, and get pre-approved to strengthen your application. You'll likely face higher rates at first, but homeownership can help you build equity as your credit improves.