Can You Get a Mortgage With Bad Credit? Yes, Here’s How

The short answer is yes, you can get a mortgage with bad credit, but the path requires more preparation than it does for someone with a strong credit profile. Lenders view your credit score as a window into your financial behavior, and a lower score signals higher risk. However, the mortgage industry has evolved to serve a wide range of borrowers, including those with scores in the 500s and 600s. The key is understanding which loan programs are available, how much you will need for a down payment, and what steps you can take to offset your credit risk in the eyes of an underwriter.

Before you start browsing homes or comparing rates, it is important to assess your complete financial picture. A credit score is just one factor in the underwriting process. Lenders also weigh your debt-to-income ratio, employment history, and available savings. By focusing on these areas, you can build a compelling application that demonstrates your ability to repay the loan, even if your credit history has some blemishes. In this guide, we will break down the specific loan options, the costs involved, and the strategies you can use to secure a home loan with less-than-perfect credit.

Understanding the Credit Score Tiers for Mortgages

Mortgage lenders do not use a single universal standard when evaluating credit. Instead, they categorize scores into tiers that determine eligibility for different loan types. Generally, a score above 740 qualifies you for the best interest rates and terms. Scores between 620 and 739 are considered acceptable for most conventional loans, though you may pay a higher rate. The real challenge arises when your score falls below 620, as this places you in the subprime category for many lenders.

Once you dip below 620, your options narrow, but they do not disappear. Government-backed loans, such as FHA and VA loans, have more lenient requirements. The Federal Housing Administration (FHA) allows scores as low as 500 with a 10% down payment, and 580 with just 3.5% down. This makes an FHA loan one of the most accessible routes for borrowers with bad credit. On the other hand, conventional loans typically require a minimum score of 620, though some portfolio lenders may go lower if you have compensating factors like a large down payment or significant cash reserves.

To understand where you stand, check your credit reports from all three major bureaus before applying. Errors are common, and a simple correction could boost your score by 50 points or more. You can dispute inaccuracies directly with the bureaus, but this process takes time. If you are in a hurry to buy, you might consider working with a lender that offers manual underwriting, which evaluates your payment history on rent and utilities rather than relying solely on your credit score.

Mortgage Options for Borrowers With Bad Credit

When you have bad credit, the type of mortgage you choose matters more than the lender you pick. Each loan program has its own credit thresholds, down payment requirements, and insurance costs. Below are the most viable options for borrowers with scores below 620, along with the trade-offs you need to consider.

• FHA Loans: These are backed by the federal government and allow scores as low as 500. You will need a 10% down payment if your score is below 580, or 3.5% if it is above that threshold. FHA loans require mortgage insurance premiums (MIP) for the life of the loan in most cases.
• VA Loans: If you are a veteran, active-duty service member, or eligible surviving spouse, a VA loan is an excellent option. There is no minimum credit score set by the Department of Veterans Affairs, though most lenders require at least 580 to 620. VA loans offer 0% down payment and no ongoing mortgage insurance.
• USDA Loans: These are designed for rural and suburban homebuyers with low to moderate income. The USDA does not set a hard minimum credit score, but lenders typically require at least 640. If your score is lower, you may still qualify with a manual underwrite and a stable income.
• Conventional Loans: Fannie Mae and Freddie Mac require a minimum score of 620 for a fixed-rate mortgage. You can put down as little as 3% with the HomeReady or Home Possible programs, but you will face higher interest rates and private mortgage insurance (PMI) if your score is on the lower end.

Each of these options serves a different borrower profile. For most people with bad credit, an FHA loan is the most accessible because of its low down payment requirement and lenient score threshold. However, the mandatory mortgage insurance can add a significant amount to your monthly payment. If you have a military connection, the VA loan is superior due to its zero-down feature and lack of insurance premiums, but you will need to find a lender willing to work with your specific score.

It is also worth noting that some private lenders offer non-qualified mortgages (non-QM) for borrowers with credit issues. These loans are not backed by the government and often require larger down payments, sometimes 20% or more. In exchange for the higher equity, lenders may accept lower scores and offer flexible income verification methods. These loans are riskier and come with higher rates, so they should be a last resort after exploring government-backed options.

How to Improve Your Chances of Approval

While a low credit score is a hurdle, it is not the only factor that determines your approval. Lenders want to see that you have the income to make your payments and the discipline to prioritize your mortgage over other debts. To strengthen your application, focus on lowering your debt-to-income ratio (DTI). This is calculated by dividing your total monthly debt payments by your gross monthly income. Most lenders prefer a DTI below 43%, though FHA loans allow up to 50% in some cases.

Another way to offset a low score is to increase your down payment. A larger down payment reduces the lender’s risk because you have more equity in the home from day one. If you can put down 20% on a conventional loan, you can avoid PMI and may qualify for a lower interest rate even with a score in the low 600s. For FHA loans, a 10% down payment can help if your score is below 580, and it also shortens the duration of your mortgage insurance premiums to 11 years instead of the life of the loan.

Finally, consider adding a co-borrower with a stronger credit profile. A spouse, parent, or family member can sign the loan with you, and the lender will use the higher of the two middle scores for qualification. This strategy can instantly move you from a subprime risk to a prime borrower, unlocking better rates and terms. Just remember that the co-borrower is equally responsible for the debt, so this decision should not be taken lightly.

The Role of Interest Rates and Fees

Borrowers with bad credit should expect to pay more for their mortgage over time. Lenders price risk into the interest rate, so a score in the 500s could result in a rate that is 1 to 2 percentage points higher than the market average. On a $250,000 loan, a 1.5% rate difference adds roughly $200 to your monthly payment and tens of thousands of dollars in interest over a 30-year term.

In addition to a higher rate, you may face larger closing costs and origination fees. Some lenders offset the risk by charging discount points, which are upfront fees paid to lower your interest rate. While this can reduce your long-term costs, it requires more cash at closing. If you are short on savings, you may want to accept a higher rate and use your cash for the down payment and reserves instead. Use a mortgage calculator to model different scenarios and find a balance between upfront costs and monthly payments.

It is also critical to shop around. Different lenders have different risk appetites, and one may be willing to approve you where another denies you. Online platforms like Express Mortgage Quotes allow you to compare offers from multiple verified lenders in one place. You can submit one inquiry and receive personalized quotes based on your credit profile, making it easier to find a competitive rate without damaging your credit with multiple hard inquiries.

Steps to Rebuild Credit Before You Apply

If you are not in a rush to buy a home, the best strategy is to spend six to twelve months improving your credit score. Even a modest improvement can save you thousands of dollars over the life of the loan. Start by paying down revolving credit card balances to below 30% of your credit limits. This is one of the fastest ways to boost your score, as credit utilization is a major factor in the FICO scoring model.

Next, make all of your payments on time, and set up automatic payments to avoid accidental late payments. Payment history accounts for 35% of your FICO score, so consistency is key. If you have any accounts in collections, negotiate a pay-for-delete agreement with the creditor. This means you agree to pay the debt in exchange for the negative item being removed from your credit report. Not all creditors will agree, but it is worth asking.

Once your score improves, you can revisit your mortgage options with more confidence. A score of 620 opens the door to conventional loans, and a score of 640 or above qualifies you for USDA loans and better FHA terms. You can track your progress using free credit monitoring services, and many lenders will give you a preliminary assessment without a hard credit pull. For a detailed roadmap on this topic, refer to our guide on the best mortgage lenders for bad credit in 2026.

Finding the Right Lender and Avoiding Scams

Working with a reputable lender is essential, especially when your credit is less than perfect. Unfortunately, subprime borrowers are often targeted by predatory lenders who charge exorbitant fees and offer loans with balloon payments or adjustable rates that reset after a few years. To protect yourself, look for lenders that are transparent about their fees and willing to explain the terms in plain language. You can also check a lender’s reputation with the Better Business Bureau and your state’s banking regulator.

When you compare offers, pay attention to the Annual Percentage Rate (APR) rather than just the interest rate. The APR includes closing costs and other fees, giving you a truer picture of the total cost of the loan. Also, be wary of any lender that guarantees approval before reviewing your income and assets. These are often signs of a bait-and-switch scheme.

Using a comparison platform can help you vet lenders before you commit. Express Mortgage Quotes connects you with a network of verified lenders who are accustomed to working with borrowers across the credit spectrum. By submitting a single inquiry, you can receive multiple quotes and evaluate which lender offers the best combination of rate, fees, and customer service. This approach saves you time and reduces the risk of falling victim to a predatory operation.

Preparing Your Documentation for a Smooth Process

Once you choose a lender, the approval process will require substantial documentation. To avoid delays, gather your paperwork before you apply. You will need two years of tax returns, recent pay stubs, bank statements, and documentation of any other income sources such as alimony or rental income. If you are self-employed, you may also need profit and loss statements and a balance sheet for your business.

Be prepared to explain any credit issues on your report. Underwriters appreciate a brief letter that outlines the circumstances, such as a medical emergency or job loss, and explains what you have done to prevent it from happening again. This personal touch can humanize your application and help the underwriter see you as more than just a number. Additionally, avoid making any large deposits or withdrawals from your bank accounts during the underwriting period, as this can raise questions about the source of your funds.

The entire process, from application to closing, typically takes 30 to 45 days. During this time, do not open new credit accounts or take on new debt. A single new credit inquiry or a missed payment could derail your approval. Stay in close contact with your loan officer and respond to any requests for information within 24 hours. If you are still in the early stages of planning, you may want to review our comprehensive guide on qualifying for a mortgage with bad credit to ensure you are on the right track.

Getting a mortgage with bad credit is challenging, but it is far from impossible. With the right loan program, a solid down payment, and a lender who understands your situation, you can achieve homeownership and start building equity. The key is to be realistic about the costs, patient with the process, and proactive in improving your financial health.