How to Buy a House With Bad Credit
Last updated: October 2026 · Editorial standards
Having a low credit score doesn’t automatically disqualify you from buying a home — but it does limit your options and typically increases your costs. Here’s what you need to know.
What Credit Score Do You Need to Buy a House?
Different loan programs have different minimum credit score requirements:
| Loan Type | Minimum Credit Score |
|---|---|
| FHA loan | 580 (3.5% down) / 500 (10% down) |
| VA loan | No official minimum (lenders often require 580–620) |
| USDA loan | 640 (some lenders may go lower) |
| Conventional loan | 620 |
| Jumbo loan | 700+ |
If your score is below 580, your options narrow significantly. A score below 500 will disqualify you from most government-backed loans.
Best Loan Programs for Bad Credit
FHA Loans
FHA loans are the go-to option for buyers with damaged credit. Backed by the Federal Housing Administration, they allow:
- Credit scores as low as 580 with 3.5% down
- Credit scores as low as 500 with 10% down
- Higher debt-to-income ratios than conventional loans
The tradeoff: FHA loans require mortgage insurance for the life of the loan (unless you refinance).
VA Loans
If you’re a veteran, active-duty service member, or eligible surviving spouse, VA loans offer:
- No official credit score minimum (though lenders set their own)
- No down payment required
- No private mortgage insurance
- Competitive interest rates even with lower scores
VA loans are the best mortgage available for those who qualify.
USDA Loans
For rural and some suburban areas, USDA loans offer:
- No down payment required
- Low mortgage insurance costs
- Minimum 640 credit score at most lenders
Subprime or Non-QM Loans
Some lenders specialize in non-qualified mortgage (non-QM) loans for borrowers who don’t meet standard guidelines. These loans carry:
- Higher interest rates
- Larger down payment requirements
- More fees
Use these as a last resort while working on improving your credit.
Steps to Buy a Home With Bad Credit
1. Know Your Exact Score
Get your credit reports from all three bureaus at AnnualCreditReport.com. Review each one for errors — disputed inaccuracies can sometimes be removed quickly, boosting your score.
2. Find the Right Lender
Not all lenders accept the minimum scores allowed by loan programs. Shop multiple lenders — especially FHA-approved lenders and credit unions — to find one willing to work with your score.
3. Save a Larger Down Payment
A larger down payment reduces lender risk. If your score is between 500 and 579, FHA requires 10% down. Putting more down can also get you better terms.
4. Reduce Your Debt
Paying down credit card balances before applying can improve your score and lower your debt-to-income ratio — both help your application.
5. Add a Co-Borrower
A co-borrower with stronger credit can help you qualify and potentially get a better rate. Keep in mind the co-borrower is equally responsible for the debt.
6. Wait and Rebuild
If you’re not in a rush, 6–12 months of credit improvement could move you from a rejected application to an approved one — and save you tens of thousands in interest.
What Bad Credit Costs You
A lower credit score means a higher interest rate. The cost difference is significant over a 30-year loan.
Example on a $300,000 mortgage:
- 760+ score: ~7.0% rate → ~$1,996/month
- 620 score: ~8.5% rate → ~$2,307/month
- Difference: ~$311/month, or $112,000 over 30 years
Key Takeaways
Bad credit makes homeownership harder and more expensive — but not impossible. FHA loans are the most accessible path for most borrowers. If you have time, improving your credit before applying will save you substantial money over the life of your loan.
Frequently Asked Questions
Can I buy a house with a 500 credit score? Yes, with an FHA loan and a 10% down payment. You’ll face limited lender options and a higher rate.
How quickly can I improve my credit score? Paying down high balances and disputing errors can produce noticeable improvements in 30–90 days. Major negatives like late payments or collections take longer to fade.
Does a co-signer help with bad credit? A co-borrower (who appears on the loan and title) can help. A co-signer (who doesn’t appear on title) is less commonly accepted by lenders.
What is the fastest way to improve my credit score? Pay down revolving balances below 30% of your credit limits, dispute any errors, and avoid opening new accounts before applying.
