Can you buy a house with bad credit? Yes. With a credit score as low as 500, you can qualify for an FHA loan with a 10% down payment. VA and USDA loans also help buyers with lower scores. The key is knowing which loan fits your situation and improving your score — even a little — before applying.
You Can Own a Home — Even With Bad Credit
A medical bill you couldn’t pay. A job loss that came out of nowhere. A rough year that left marks on your credit report.
If that sounds familiar, you’re not alone — and you’re not out of options.
Bad credit makes buying a home harder, yes. But it doesn’t make it impossible. Real people with low credit scores buy homes every year. They just need the right plan.
This guide gives you exactly that — honest advice, real loan options, and practical steps to get you closer to a front door with your name on it.
Step 1: Check Your Credit Before You Do Anything Else
Don’t guess. Pull your actual credit reports from all three bureaus — Equifax, Experian, and TransUnion — at AnnualCreditReport.com. It’s free.
Your scores can differ by 30 to 50 points between bureaus. That gap can mean the difference between qualifying or not.
When you review your reports, look for:
- Errors — wrong balances, payments marked late when you paid on time, accounts that aren’t even yours. These are more common than you’d think, and disputing them can boost your score fast.
- Your actual score — face the number. Here’s how lenders read it:
- Below 580 — Poor (limited options, focus on rebuilding)
- 580–669 — Fair (FHA and some VA loans available)
- 670–739 — Good (most loan programs open to you)
- 740+ — Excellent (best rates)
- What’s hurting you most — late payments, high balances, collections, charge-offs? Identify the biggest problems first so you can fix them in the right order.
Step 2: Know Your Bad Credit Home Loan Options
Here’s the part most people miss: conventional bank mortgages aren’t your only option. Several government-backed programs exist specifically for buyers with lower scores.
FHA Loans — The Most Common Path
FHA loans are backed by the Federal Housing Administration and designed for buyers who don’t have perfect credit.
- Score 580+ → 3.5% down payment
- Score 500–579 → 10% down payment required
- Below 500 → Not eligible; focus on credit repair first
This is the most widely used bad credit home loan option, and for good reason — the score thresholds are low and the down payment is manageable.
VA Loans — Best If You’ve Served
If you’re a veteran, active-duty service member, or eligible surviving spouse, VA loans are outstanding:
- No down payment required
- No private mortgage insurance
- Competitive interest rates
The VA doesn’t set a minimum score, but most lenders want 580–620. If you have military eligibility, start here. This is one of the best mortgage products available to anyone, period.
7 Benefits of VA Mortgage Loan every Veteran Should Know
USDA Loans — If You’re Open to Suburban or Rural Areas
USDA loans require no down payment and are available for homes in eligible areas (often more than people expect).
- Most lenders prefer a 640+ score for streamlined approval
- Lower scores may be approved through manual underwriting
- Check eligible areas at the USDA website
Conventional Loans
These require a minimum 620 score and aren’t backed by a government program. Below 620, your options here are very limited. Above 620, they open up — though your rate will be higher than someone with great credit.
Step 3: Improve Your Credit Score Before You Apply
You don’t need an 800. But even moving from 580 to 620 can unlock new loan programs. Moving from 620 to 680 can save you thousands per year in interest.
Here are the most impactful moves to improve your credit score before buying a house:
Pay down credit card balances. Credit utilization — how much of your available credit you’re using — is a huge factor. Get balances below 30% of your limit. Below 10% is even better. This is the fastest way to move the needle, and some people gain 30–50 points in just two billing cycles.
Don’t miss a single payment. Payment history is 35% of your score. Set up autopay for at least the minimum on every account. One missed payment can undo months of progress.
Keep old accounts open. Closing an old credit card shortens your credit history and reduces available credit — both hurt your score. Leave them open, even if you never use them.
Don’t apply for new credit. Every new application drops your score a few points. In the months before your mortgage application, don’t open any new cards or loans.
Handle collections carefully. Don’t just pay them off blindly — sometimes it backfires. Talk to a HUD-approved housing counselor first (more on that below).
Step 4: Save a Bigger Down Payment
Your down payment and your credit score are connected in a lender’s mind. When your credit is low, a bigger down payment can help tip the scale in your favor.
Putting 10–20% down instead of 3.5%:
- Makes lenders more willing to approve you
- Lowers your loan-to-value ratio, which improves your rate
- Can eliminate private mortgage insurance
- Reduces your monthly payment
If your score sits right on the edge of qualifying, a larger down payment can be the single thing that gets you approved.
Step 5: Use These Extra Strategies
Add a Co-Borrower or Co-Signer
If your credit is the main obstacle, adding someone with stronger credit to your application can change everything. A co-borrower shares ownership and their income and credit combine with yours. A co-signer doesn’t own the property but guarantees the loan.
This is a big ask of someone — their credit is on the line if you miss payments. If someone offers to do this for you, take it seriously, communicate clearly, and follow through.
Work With a HUD-Approved Housing Counselor
This is free, and most people don’t know it exists.
HUD-certified nonprofit counselors review your credit line by line, help you build a realistic improvement plan, explain which loan programs fit your situation, and often know which local lenders work best with buyers like you.
Find one at hud.gov/counseling or call 800-569-4287.
Shop Multiple Lenders
Not every lender treats bad credit the same way. Credit unions are often more flexible than big banks. Community banks sometimes offer in-house loans with fewer restrictions. Mortgage brokers can shop your application across dozens of lenders at once.
Important: If you apply with multiple lenders within a 14–45 day window, credit bureaus count it as one inquiry. Shopping for the best rate won’t compound the damage to your score — so don’t hesitate.
Common Mistakes to Avoid
- Applying too soon. Impatience is expensive. A rejection means hard inquiries and wasted time. Know your target score and wait until you reach it.
- Ignoring the interest rate. Getting approved at a 540 score is possible — but your rate could be 2–3% higher than someone with a 680. On a $300,000 loan over 30 years, that’s $80,000–$100,000 more in interest. Sometimes waiting six months changes everything.
- Forgetting the full monthly cost. Your payment includes property taxes, homeowner’s insurance, and often mortgage insurance — not just principal and interest. Build all of it into your budget.
- Giving up after one rejection. Different lenders have different standards. One “no” doesn’t mean all lenders will say no. Explore more options and address what caused the rejection.
How Long Will It Actually Take?
Honest answer: it depends on what’s hurting your score.
- High credit card balances? Pay them down. You could see results in 1–2 billing cycles.
- Late payments? They technically stay on your report for 7 years, but their impact fades significantly over time.
- Collections or charge-offs? These take longer, but their damage decreases as they age.
Many buyers see meaningful improvement in 3–6 months of focused effort. Getting from 520 to 580 might take 6 months. Getting from 580 to 640 could take another 6–12. The sooner you start, the sooner you’re done.
Frequently Asked Questions
What’s the minimum credit score to buy a house? It depends on the loan. FHA loans accept scores as low as 500 (with 10% down) or 580 (with 3.5% down). VA loans have no official minimum, though most lenders want 580+. Conventional loans typically require 620.
Can I get a mortgage with a 500 credit score? Yes — through an FHA loan with a 10% down payment. Your options are limited and your rate will be higher, but 500 is not a dead end. A few months of credit improvement can open up significantly better terms.
How much does bad credit actually cost on a mortgage? More than most people realize. A 620 score might mean paying 1.5–2% more in interest than someone with a 760. On a $300,000 loan over 30 years, that difference can total $80,000–$100,000. Improving your score before you borrow has enormous long-term value.
Does shopping around for a mortgage hurt my credit? Not if you do it within a 14–45 day window. Credit bureaus treat multiple mortgage inquiries in that timeframe as a single event. Shop confidently.
Can I buy a house after bankruptcy? Yes. After Chapter 7, FHA loans require a 2-year waiting period. Conventional loans require 4 years. After Chapter 13, FHA may be available after 1 year of successful repayment with court approval.
Are there programs specifically for first-time buyers with bad credit? Yes — many states offer first-time homebuyer programs with down payment assistance, closing cost grants, and below-market rates for lower-score buyers. A HUD counselor can identify what’s available in your area.
The Bottom Line: Start Today
Bad credit makes this harder. I won’t pretend it doesn’t. But it doesn’t close the door — it just means the path looks a little different.
Here’s what actually works:
- Pull your credit reports this week and face the numbers
- Dispute any errors you find
- Pay down credit card balances aggressively
- Explore FHA, VA, or USDA loan programs based on your situation
- Call a HUD-approved housing counselor — it’s free
- Save as much as you can for a down payment
- Shop multiple lenders when you’re ready
The people who get there don’t wait for perfect conditions. They work with what they have and improve as they go.
That can be you.
This article is for informational purposes only and does not constitute financial, credit, or mortgage advice. Loan requirements vary by lender, state, and individual profile. Consult a licensed mortgage professional and HUD-approved housing counselor for guidance specific to your situation.