Can I get a home loan with bad credit?

Christy Rakoczy Bieber Written by:
Erin Dunn Edited by:
Updated
•8 min read • Leer en español
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Key Takeaway: It’s possible to get a home loan with bad credit, but it’s likely to come with high interest rates. Before buying, consider waiting until your credit improves to get better rates, or explore options such as FHA loans with lower down payment requirements.

It’s possible to qualify for a home loan with bad credit, but your options may be limited to certain government-backed loans like FHA loans or USDA loans. Having a larger down payment may also help you qualify with a lower credit score. 

If you find a mortgage lender that advertises home loans for bad credit, you’ll want to examine the terms and costs of the loan carefully to avoid taking out a loan that doesn’t fit your budget.

Can I buy a house with bad credit?

When you apply for a mortgage, lenders will check your credit. Most people who take out mortgages have strong credit. The median credit score was 775 for new mortgage originations in the fourth quarter of 2025, according to a Federal Reserve report.

The minimum credit score you need to get a mortgage depends on the type of home loan. Many lenders look for a credit score of at least 620 for a conventional loan, while government-backed loans can be more flexible. 

For instance, you may qualify for an FHA loan with a score as low as 500 (with a 10% down payment) or 580 (with 3.5% down). VA and USDA loans don’t set a minimum score, but lenders often want to see credit scores between 580 and 640. 

Keep in mind that your credit score is just one piece of the picture. Lenders also weigh your debt-to-income ratio, income and down payment. And the higher your scores, the better your odds of landing a competitive interest rate.

What’s the average credit score for a mortgage?

  • Average VantageScore 3.0 credit score of Intuit Credit Karma members with a mortgage: 711
  • Percentage of members with a mortgage who fall within each credit score band:
    • 300–600: 16.7%
    • 601–660: 13.5%
    • 661–780: 37.2%
    • 781–850: 32.6%

Source: Insights from the aggregated reports of roughly 36.4 million Credit Karma users with a mortgage. All aggregate data analyzed was pulled on July 13, 2026, and came from members’ TransUnion credit reports. Average is based on information from the previous 90 days.

What is bad credit?

Bad credit generally means credit scores that are below the average score of U.S. consumers. Lenders consider lower credit scores to be a signal of greater risk, and therefore hold back on loan approvals for these applicants or charge them more in interest and fees.

FICO considers credit scores under 580 to be “poor credit.” It defines “fair credit,” which is also below the average American credit score, as scores in the 580 to 669 range.

VantageScore 3.0 — the scores you’ll see on Credit Karma — consider scores between 300 and 600 to be “poor” while 601 to 660 are “fair.”

While getting a home loan with bad credit is possible, the Consumer Financial Protection Bureau warns that these loans often come with very high interest rates and could put borrowers at risk of default.

Because applying for a mortgage with bad credit could mean you only qualify for a loan that may be difficult to pay back, it might be smart to wait to buy a home until your credit scores improve.

What are some home loan options for people with bad credit?

While many mortgage lenders don’t offer loans to people with bad credit, some lenders do lend to people with lower scores.

You may hear these types of loans referred to as “subprime mortgages,” which essentially means you’re paying a higher interest rate than a “prime” mortgage because lenders see the loan as riskier. You may only have the option to take out an adjustable-rate mortgage — where the rate can change over time.

While avoiding subprime loans is important because of the risks, finding an affordable mortgage with bad credit is possible.

FHA loans

The Federal Housing Administration, or FHA, works with lenders to help people become homeowners even if their credit scores aren’t strong.

FHA loans allow borrowers with down payments as low as 3.5% to qualify for mortgage loans, as long as their credit scores are 580 or higher. For homebuyers with scores between 500 and 579, it’s still possible to obtain a mortgage guaranteed by the FHA, but a minimum 10% down payment is required.

Here are some FHA lenders to consider.

  • New American Funding: This lender offers FHA 203(k) loans for homes that need renovations or repairs.
  • Rocket Mortgage: Rocket Mortgage might be a good fit if you like the idea of an entirely online mortgage process.
  • Movement Mortgage: If you prefer in-person service and more personal attention, you might benefit from Movement’s large branch network.

VA loans

Eligible veterans, current service members and surviving spouses of service members may be able to qualify for a home loan through the Department of Veterans’ Affairs.

VA loans are offered by private lenders, but the VA guarantees a portion of the loan, which can result in more-favorable terms. You may be able to qualify with lower credit scores or even a past bankruptcy. You also may qualify with no down payment.

Here are some VA lenders to consider.

  • Cardinal Financial: If you want to connect to a loan officer during the mortgage process, Cardinal Financial might be a good fit.
  • USAA: A USAA mortgage should be on your radar if you’re already a USAA member or are eligible become one and prefer to work with a lender that focuses the needs of the military community.
  • Veterans United Home Loans: If you hope to improve your credit and take out a VA loan at the same time, you might benefit from Veterans United Home Loans’ free credit counseling service.

USDA loans

Low- to moderate-income borrowers in eligible rural areas may be able to find a loan through the U.S. Department of Agriculture. Plus, you don’t need perfect credit to qualify for a USDA loan.

Some USDA lenders to consider:

  • PNC Bank: If you already bank with PNC or hope to eventually borrow against your home’s equity through a home equity line of credit, a PNC mortgage might be a strong choice.

State and local programs

Some states also offer programs to facilitate homeownership by offering eligible borrowers the opportunity to get a home loan with bad credit. For example, the State of New York Mortgage Agency provides help to first-time homebuyers. There’s no minimum for credit scores for SONYMA loans, although there are other eligibility requirements.

Check with your local or state housing department to see if it offers a program you may qualify for.

How can you increase your chances of mortgage approval?

If you’re hoping to get a reasonable mortgage with bad credit, there are a few things you can do to try to boost your odds of getting approved.

Save a larger down payment

If you put more money down on a home, lenders may see a loan for you as less risky.

It’s ideal to target a down payment of at least 20% of the home purchase price because that lets you avoid the cost of PMI, or private mortgage insurance. But the more you can put down the better. Do your best to save as much as you can for a down payment.

Get a co-signer

A co-signer agrees to take legal responsibility for repaying the loan if you can’t. But asking someone to be a co-signer is a big deal, because if you don’t pay, the lender can try to collect from the cosigner.

Still, close family members or friends may be willing to take the risk.

Improve your debt-to-income ratio

The amount of debt you already owe compared to your income is a key factor in determining if you’ll be approved for a mortgage loan. If you have little existing debt and your income is high enough to afford your mortgage, getting approved can be easier.

A good rule of thumb is to ensure your debt-to-income ratio for a mortgage lender is 36% or less. Remember, your mortgage is part of this ratio.

Take steps to improve your credit

Boosting your credit is one of the best ways to improve your chances of being approved for a loan — and with better terms. One way to help improve your credit is by checking your credit reports for mistakes and disputing any incorrect information.

Paying off debt to keep your credit utilization below 30% and making on-time payments can also help improve your credit. Another tip is to only apply for new credit when you absolutely need it, so lenders don’t think you’re in a cash crunch.

How can I get a home loan for the first time?

The mortgage process is similar for everyone — start by understanding your credit and finances, gather your documents, compare lenders and apply for preapproval.

If you have bad credit, look into the loan types and programs that may help you get a home loan for the first time, like FHA, VA and USDA loans. Improving your credit before buying your first home may help you in the long run.

But if that’s not an option, applying for a few preapprovals — within 14 days of your first application to prevent multiple hard credit inquiries — with different lenders can help you find the best rates and terms for you. Check usa.gov or your state’s website to learn more about first-time homebuyer programs.

Next steps: Should you take out a mortgage with bad credit?

Through the lender’s mortgage application process, you’ll find out if you’re eligible for financing. But being approved for a loan doesn’t necessarily mean you should take it. In fact, there are some circumstances where you should probably decline to borrow.

You may not want to borrow …

  • If your mortgage payments will exceed around 30% of your monthly income. It might be difficult for you to afford the payments, which could put you in a position that risks foreclosure.
  • If you’re offered a mortgage only at a very high interest rate. You’ll make higher monthly payments, and your loan will cost more over time than if you can wait until your credit improved enough to get a better deal.
  • If your credit scores are low because you have trouble paying bills or have a lot of debt. Instead of adding another major financial obligation, you may want to wait until your debt is under control.

You should also consider your general financial readiness to buy a home before committing to a mortgage. For example, you’ll want to have a down payment and money to cover closing costs ready to go before signing on the dotted line.

You should have emergency savings, since becoming a homeowner means facing surprise home expenses from time to time, like a fallen tree or broken water heater.

FAQs about home loans for bad credit

You might be able to get approved for an FHA loan with a credit score of 500. But you’ll need a down payment of at least 10%.

Most conventional mortgages require a minimum credit score of 620. But you might be able to take out a government-backed loan, like an FHA loan with a lower score.

Yes, you may be able to qualify for a mortgage with a low credit score. An FHA loan, for example, allows lenders to approve borrowers with scores as low as 500 as long as they have a 10% down payment.

There are mortgage lenders that say they approve borrowers with lower credit scores. A couple of examples include Caliber Home Loans and Cornerstone First Financial.

Credit scores below 620 are often classified as low by mortgage lenders, and you’ll likely have a more difficult time qualifying for a home loan.