How To Buy A House With Bad Credit | Bankrate (2024)

Key takeaways

  • You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan.
  • Some mortgage lenders offer bad credit loans with more flexible qualifying requirements but higher costs. Others offer free credit counseling to help you improve your score before applying for a loan.
  • While you might be eligible for a mortgage with a low credit score, you'll pay a higher interest rate for the loan. That's why it's best to work on your credit prior to getting a mortgage.

Your credit score is the first factor mortgage lenders consider when determining whether you’re eligible for a loan. In general, a good to excellent credit score translates to more loan options and a better mortgage interest rate. However, you might still be able to buy a house with a lower credit score. Here’s how.

Can you buy a house with bad credit?

Yes, you could buy a house with bad credit. There are several mortgage programs that allow for lower credit scores, including conventional (the most popular loan type) and FHA loans.

The typical mortgage borrower, though, has very good credit. As of the fourth quarter of 2023, the median credit score for a mortgage borrower was 770, according to the Federal Reserve Bank of New York. Just 4 percent of mortgages went to borrowers with credit scores below 620.

Money tip: Mortgage lenders reserve their best rates for borrowers with credit scores at 740 or higher — considered “very good” by FICO scoring standards.

What do mortgage lenders consider a low credit score?

Your credit score isn’t the only factor in your mortgage approval odds, but it’s a key indicator of your risk as a borrower. Mortgage lenders most often use the FICO credit scoring model to assess creditworthiness. Here’s how those ratings work:

Credit score rangeRating
Source: FICO
Below 580Poor
740-799Very good
800 or aboveExcellent

How do lenders evaluate your credit?

Lenders rely on data from the three main credit reporting bureaus, Equifax, Experian and TransUnion. Your lender will look at the middle credit score of the three when considering you for a mortgage. In addition to your scores, your lender will look at your credit report, including total debt and any issues like defaults or late payments.

How much will a low credit score cost you?

A poor credit score will primarily cost you in the way of a higher interest rate. Here’s an example assuming a 3 percent down payment on a 30-year conventional loan for $368,000:

FICO scoreAPR*Monthly paymentTotal interest paid
*As of March 2024

Source: myFICO loan savings calculator


Bad credit home loans

Loan typeCredit score minimum
Conventional loan620 or 660 depending on program
FHA loan580 (or 500 with a minimum 10 percent down payment)
VA loanNo official requirement, but typically 620
USDA loanNo official requirement, but typically 640

Conventional loans

Fannie Mae and Freddie Mac each back conventional loans with a lower minimum credit score: 620 and 660, respectively. Both of these loans require just 3 percent down.

FHA loans

The Federal Housing Administration (FHA) insures FHA loans, which allows mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment.

VA loans

If you’re a military member, a veteran or married to someone who has served in the armed forces, you could benefit from a VA loan backed by the U.S. Department of Veterans Affairs. You don’t have to meet a specific credit score minimum to qualify, although many lenders do require at least 620.

USDA loans

If you have a lower income and want to buy a home in a particular rural area, look into a USDA loan. While not a hard-and-fast rule, most USDA-approved lenders require a minimum credit score of just 640.

Tips to get a mortgage with a low credit score

You can get a mortgage with a lower or bad credit score, but you’ll still need to financially prepare to make sure you get the best possible loan terms. Here are some steps to take:

1. Check your credit report for errors

If you’re wondering whether you can buy a house with bad credit, check your reports first. If you see a mistake or outdated item — generally seven years old, but sometimes longer for bankruptcies, liens and judgments — contact Equifax, Experian or TransUnion. Each credit bureau has a process for correcting errors and out-of-date information.

2. Pay down or pay off debt

When working toward buying a home with bad credit, try to pay down what you already owe. Lowering your debt load might not only boost your credit score, but also make you eligible for a bigger mortgage, thanks to a better debt-to-income (DTI) ratio.

Learn more: How to improve your credit before getting a mortgage

3. Shop around

Every mortgage lender is different, and some offer lower rates and fees than others. If nothing else, research shows that getting multiple rate quotes can save you thousands over a 30-year mortgage. Banks aren’t the only spot to get a mortgage, either. There are also non-bank and online-only lenders, credit unions and other types of mortgage companies. Check out these different types of lenders to see where you get the best offer.

4. Find a co-signer

If you have bad credit, consider asking a family member or friend with better credit to co-sign your mortgage. This can help give your application a boost — but only if the co-signer is able and willing to take on the debt. (Note that co-signing is different from co-borrowing.)

5. Avoid too-good-to-be-true loans

If you see ads promising “guaranteed” approval for a mortgage regardless of credit, it’s a red flag. Under federal rules, a lender must verify the ability of a borrower to repay a mortgage, so there can’t be a “guarantee” unless that happens. Even if you get that guaranteed approval, it usually comes with excessive or inflated costs.

6. Consider a rapid rescore

Credit report changes can take time to go through the system, so improved scores might not show up in time for a mortgage application. In this case, you can try getting a rapid rescore through your lender. In this process, your lender submits proof to a credit agency that an applicant has made recent changes or updates to their account that are not yet reflected on their credit report. You’ll need to pay for this service, but the expense might be a worthwhile tradeoff to get a better interest rate.

Bottom line

It is possible to buy a house with bad credit, but you should take steps to improve your score, if possible, before applying for a mortgage.

How To Buy A House With Bad Credit | Bankrate (2024)


How To Buy A House With Bad Credit | Bankrate? ›

The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

What is the lowest credit score you can have and still buy a house? ›

Credit Score Needed To Buy A House By Loan Type
Mortgage TypeMinimum Credit Score
Conventional loan620
FHA loan (3.5% down payment)580
FHA loan (10% down payment)500 – 579
VA loanNo industry-standard credit score requirement (Rocket Mortgage® requires a 580 score)
1 more row

How can I raise my credit score 100 points overnight? ›

10 Ways to Boost Your Credit Score
  1. Review Your Credit Report. ...
  2. Pay Your Bills on Time. ...
  3. Ask for Late Payment Forgiveness. ...
  4. Keep Credit Card Balances Low. ...
  5. Keep Old Credit Cards Active. ...
  6. Become an Authorized User. ...
  7. Consider a Credit Builder Loan. ...
  8. Take Out a Secured Credit Card.

What credit score is needed to buy a $300K house? ›

The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

What is the easiest home loan to get? ›

Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.

What credit score is needed to buy a $400,000 house? ›

The minimum FICO score needed for a conventional loan is 620. A borrower will get the best rate with a score of 740 or higher. Someone with an 850 score—the highest score for most FICO versions—will not get a better rate than someone with a 740 score.

Can you buy a house with a 480 credit score? ›

It is possible to qualify for an FHA loan with a credit score as low as 500, although you won't get the standard 3.5% down payment these loans are known for. Borrowers without a FICO Score of at least 580 need to put 10% down.

How can I raise my credit score 200 points in 30 days? ›

Try paying debts and maintaining your credit utilisation ratio of 30% or below. There are two ways through which you can pay off your debts, which are as follows: Start paying off older accounts from lowest to highest outstanding balances. Start paying off based on the highest to lowest rate of interest.

How can I fix my credit score overnight? ›

How to Raise Your Credit Score 100 Points Overnight
  1. Become an Authorized User. This strategy can be especially effective if that individual has a credit account in good standing. ...
  2. Request Your Free Annual Credit Report and Dispute Errors. ...
  3. Pay All Bills on Time. ...
  4. Lower Your Credit Utilization Ratio.

How to raise credit score 50 points in 30 days? ›

  1. Pay credit card balances strategically.
  2. Ask for higher credit limits.
  3. Become an authorized user.
  4. Pay bills on time.
  5. Dispute credit report errors.
  6. Deal with collections accounts.
  7. Use a secured credit card.
  8. Get credit for rent and utility payments.
Mar 26, 2024

How much is a downpayment on a 200K house? ›

Conventional mortgages, like the traditional 30-year fixed rate mortgage, usually require at least a 5% down payment. If you're buying a home for $200,000, in this case, you'll need $10,000 to secure a home loan.

How much do you need to make a year to afford a $300 K house? ›

How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

What is the 20% down payment on a $300 000 house? ›

A 20% down payment on a $300,000 mortgage is $60,000. The $60,000 down payment is what most lenders look for especially commercial lenders, because it helps mitigate the risk of default.

How much income do you need to qualify for a $200 000 mortgage? ›

Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300.

What kind of loan is the easiest to get approved for? ›

What is the easiest loan to get approved for? The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.

What type of loan is best for first-time buyers? ›

Government-backed mortgage loans

The Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and Department of Agriculture (USDA) back mortgage programs that are often an option for first-time homebuyers.

Can you get a home loan with a 500 credit score? ›

You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. Some mortgage lenders offer bad credit loans with more flexible qualifying requirements but higher costs. Others offer free credit counseling to help you improve your score before applying for a loan.

Can I get an FHA loan with a 500 credit score? ›

Technically, you can get approved for an FHA loan with a median FICO® Score of as low as 500, but an FHA loan with a score that low has some serious drawbacks. The first drawback is that you'll need a down payment of at least 10%. Secondly, when qualifying with a score that low, it's considered a subprime loan.

What is the minimum FICO score for a house? ›

The minimum credit score needed for most mortgages is typically around 620.

How much can I borrow with a 580 credit score? ›

You can borrow anywhere from a few thousand dollars to $100,000+ with a 580 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

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