How Can I Get a Mortgage with a Bad Credit Score?

With a low credit score, your most direct route is usually an FHA loan: FHA insures loans for scores as low as 500 with 10% down and 580 with 3.5% down. VA and USDA loans set no minimum score, and Fannie Mae sets none when its automated system approves the loan, but each lender can require more, so you need a lender whose own minimum fits your score. Expect to pay more than a borrower with good credit and to meet waiting periods after a bankruptcy or foreclosure. Before you apply, bring overdue accounts current, pay down credit card balances, and fix report errors.

Step 1: Find the programs that accept your score

Match your score to the programs below. These are the program floors as of October 2026; lenders can set higher minimums, called overlays.

FHA uses the middle of your three scores, and on a joint loan, the lowest borrower's score, so a co-borrower with a lower score sets the score for the loan. VA loans also require qualifying military service, and USDA loans require a home in an eligible rural area and income under the county limit. Minimum credit scores by loan type has the full rules for each program.

Step 2: Know what a lower score costs

A low score raises the price of a conventional loan and the cash needed for an FHA loan.

Conventional loan. Freddie Mac charges lenders a one-time credit fee based on your score and loan-to-value ratio (LTV), the loan divided by the home's value. The Federal Housing Finance Agency says lenders typically pass this kind of upfront fee to you as a slightly higher interest rate. For a $300,000 home with 5% down, a $285,000 loan at 95% LTV:

• Score 630: 2.250% x $285,000 = $6,412.50.
• Score 700: 1.125% x $285,000 = $3,206.25.
• The lower score adds $3,206.25, paid as points at closing or through a higher rate, on top of private mortgage insurance, which the insurer also prices.

Freddie Mac waives the fee for first-time buyers with income at or below 100% of the area median (120% in high-cost areas), which can make a conventional loan cheaper than it looks at a low score.

FHA loan. FHA's mortgage insurance does not change with your score. The same $300,000 home with 3.5% down at a score of 630:

• Base loan: $300,000 - $10,500 down = $289,500.
• Upfront premium: 1.75% x $289,500 = $5,066.25, which you can add to the loan.
• Annual premium: 0.55% a year for the life of the loan, about $1,592 in the first year ($289,500 x 0.55%), or $132.69 a month. FHA figures it on the average balance each year, so it falls slowly.

At a score of 560, FHA requires 10% down, $30,000 instead of $10,500. The annual premium then drops to 0.50% and ends after 11 years, but you need $19,500 more cash at closing.

Ask each lender for a Loan Estimate at your current score and compare the rate and mortgage insurance on page 1 and points on page 2, Section A.

Step 3: Use compensating factors if a person underwrites your loan

FHA lenders run your file through FHA's TOTAL Mortgage Scorecard, an automated risk tool. When it refers the file instead of accepting it, an underwriter reviews it by hand under fixed debt-to-income limits. Your debt-to-income ratio (DTI) is your monthly debt payments, including the new house payment, divided by gross monthly income.

For a standard one- or two-unit home, the lender must also verify reserves covering one month of principal, interest, taxes, and insurance after closing. You need these funds even at 31% / 43%; gifts and borrowed money do not count.

Compensating factors are documented strengths that offset risk. FHA's include:

• Cash reserves: at least 3 months of house payments left in savings after closing for a 1-2 unit home, not counting gifts or borrowed money.
• Small payment increase: the new house payment is no more than $100 or 5% above your current rent or mortgage, whichever is less, with no more than one 30-day late housing payment in the last 12 months.
• Residual income: the income left after all monthly obligations meets VA's residual income figure for your household size and region.

VA uses a similar test. Its standard DTI is 41% or less, and a lender can approve a higher ratio with a written justification, such as excellent long-term credit or significant savings. How debt-to-income ratio works covers which debts count.

Step 4: Check the waiting period after a bankruptcy or foreclosure

A recent bankruptcy or foreclosure can block approval no matter what your score is. Count from the discharge date or the date the home's title transferred:

FHA does not count divorce as a circumstance beyond your control for a foreclosure. Under VA's rules, a Chapter 7 discharge in the past 12 months generally rules out approval, and one discharged 1 to 2 years ago needs re-established credit and a cause beyond your control. A past foreclosure does not disqualify you by itself, but VA directs lenders to apply these bankruptcy timing and credit-recovery guidelines and review the foreclosure's circumstances. USDA treats a foreclosure or bankruptcy discharge in the 36 months before you apply, or a rent or mortgage payment 30 or more days late in the last 12 months, as significant derogatory credit. In every program, you need on-time payments since the event.

Step 5: Raise your score before you apply

How much these steps help depends on your credit history:

• Check all three credit reports. You can get free reports from Equifax, Experian, and TransUnion every week at AnnualCreditReport.com. Dispute any error with the credit bureau and with the business that reported it. According to the CFPB's home loan toolkit, a corrected error can lift your scores within 30 days.
• Bring every account current. Payment history is 35% of a FICO score. Pay any past-due account up to date, then pay every bill on time through closing.
• Pay down credit card balances. FICO gives 30% of the score to amounts owed, which includes the share of your card limits you are using. Paying a card from $4,500 to $1,000 on a $5,000 limit cuts your use of that card from 90% to 20%.
• Do not open new credit. The CFPB warns that financing even a new refrigerator before closing could make it harder to get a mortgage.

The CFPB says a borrower who pays bills on time and pays down credit cards could see the score improve in three months or more. If you are a few points under a cutoff, waiting can pay: reaching 580 cuts FHA's minimum down payment from 10% to 3.5%, which is $19,500 less on a $300,000 home.

Step 6: Apply with more than one lender

Overlays differ, so a lender that declines your score does not mean all lenders will. Tell each lender your approximate score and the dates of any bankruptcy or foreclosure before it pulls your credit, and ask what minimum score it accepts for the loan you want. The CFPB says most scoring models let you shop for a mortgage within a window, generally 14 to 45 days, with little or no effect on your score. A broker can send your file to several lenders at once; see using a mortgage broker with bad credit. For how the loan works after closing, see what a mortgage is.