If your credit score is less than stellar, you might still be able to buy a home. While a lower score can make qualifying more challenging, there are loan programs and strategies that can help you get a mortgage with bad credit. By understanding your options and preparing your finances, you can improve your chances of approval and potentially secure better loan terms.

What counts as bad credit for a mortgage?

Credit scores range from 300 to 850, and lenders use them to assess your likelihood of repaying a loan. As a result, they impact whether or not you can get a mortgage. While every lender sets its own credit score standards, here’s a general breakdown:

• Excellent: 740–850
• Good: 670–739
• Fair: 580–669
• Poor: Below 580

If you’re not sure how to check your score, we have a guide to help. 

In mortgage lending, scores below 620 are often considered “bad credit.” That said, you can still get a mortgage with bad credit, especially through government-backed loan programs that have more flexible requirements.

How your credit score affects mortgage approval

Your credit score influences more than just whether you get approved. It also affects:

• Interest rates: Lower scores usually mean higher rates, which increase your monthly payments and total loan cost.
• Down payment requirements: You might need to put more money down to offset lender risk.
• Loan program eligibility: Certain programs have minimum credit score requirements.
• Mortgage insurance costs: If required, mortgage insurance rates might be higher for borrowers with lower credit scores.

Understanding how your score impacts these factors can help you plan your mortgage strategy more effectively.

Loan programs that allow bad credit

If you want to get a mortgage with bad credit, some programs are more accessible than others:

• FHA loans: Backed by the Federal Housing Administration (FHA), these allow credit scores as low as 500 with a 10% down payment or 580 with as little as 3.5% down.
• VA loans: Available to eligible veterans, service members, and some spouses, these loans have no formal minimum credit score, but lenders often prefer 580 or higher.
• USDA loans: For qualifying rural and suburban buyers, these loans typically require a 640 score, but some lenders accept lower with manual underwriting.
• Non-QM loans: “Non-qualified mortgage” loans may use alternative documentation for income and be more flexible on credit, but rates and fees are often higher.

Steps to improve your chances of approval

Even if your score is low, taking certain steps can make it easier to get a mortgage with bad credit:

• Save for a larger down payment: More equity reduces lender risk and can offset a low score.
• Reduce your debt-to-income (DTI) ratio: Pay down existing debts to improve your financial profile.
• Show steady income: Consistent employment history and stable earnings help reassure lenders.
• Provide a strong explanation: If your bad credit is due to a one-time event, a letter of explanation can help.
• Shop around: Different lenders have different risk tolerances and program options.

How to improve your credit before applying

If you have time before you need to buy, working on your credit score can make a big difference. Here’s how:

• Pay bills on time: Your payment history is the biggest factor in your score/
• Lower credit card balances: Aim to keep usage below 30% of your credit limit
• Avoid opening new accounts or taking out new loans: Too many recent inquiries can lower your score temporarily.
• Check your credit report: Dispute any errors that may be dragging down your score.
• Pay off collections: Some scoring models ignore paid collections, which could boost your score.

Improving your score by even 20–40 points can unlock better mortgage rates and terms.

What to expect when you get a mortgage with bad credit

If you qualify to get a mortgage with bad credit, you should be prepared for:

• Higher interest rates: Even with approval, your rate will likely be above market average.
• Stricter loan terms: Lenders may require more documentation or limit your loan amount.
• Mortgage insurance: FHA and some conventional loans require insurance, which adds to your monthly payment.
• Less negotiating power: A weaker credit profile can make sellers less confident in your offer, especially in competitive markets.

Knowing these realities upfront can help you budget and negotiate more effectively.

Alternatives if you can’t qualify yet

If your credit is too low to get a mortgage now, you still have options:

• Rent-to-own agreements: You can explore renting a home with the option to buy later while you work on your credit.
• Co-signer on your loan: A family member or trusted friend with good credit may help you qualify.
• Delay your purchase: Use the time to save more for a down payment and improve your credit score.
• Explore state and local programs: Some offer assistance or more flexible requirements for first-time buyers.

Taking a step back to strengthen your financial position could put you in a much better spot when you reapply.

So, can you get a mortgage with bad credit?

It’s possible to get a mortgage with bad credit, but it requires careful planning, realistic expectations, and often a willingness to accept higher costs. By exploring loan programs that cater to lower credit scores, improving your financial profile, and shopping with the right lenders, you can increase your chances of becoming a homeowner — even if your credit history isn’t perfect.

Over time, consistent on-time mortgage payments can help improve your credit score, opening the door to refinancing at better terms in the future.

Are you ready to explore your options? At Rates.Now, we connect you with lenders who can help you get the best mortgage rate even with bad credit — and guide you toward improving your financial profile for the best terms possible. Start your personalized mortgage rate search today and take your first step toward homeownership.

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