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You are not alone if you are wondering whether a low credit score means homeownership is out of reach. Many people assume that bad credit is a deal-breaker when applying for a mortgage, but that’s not necessarily true. In reality, there are several options for homeownership, even if your credit is not perfect. It may take extra work, but it is very possible, and in some cases, smarter than waiting.
Let’s break down the facts and clear up the myths so you can confidently move forward.
Credit scores generally range from 300 to 850. A score above 750 is considered excellent, while anything between 700 and 749 is considered good. Scores between 650 and 699 fall into the fair category. Below that—especially anything under 620—is typically labeled as poor or very poor by lenders.
Most traditional lenders like to see a score of at least 620, though the higher your score, the better your loan terms tend to be (Rocket Mortgage, 2024). However, several government-backed loan programs accept much lower scores, offering more opportunities to prospective homeowners with credit challenges.
Yes, You Can Buy a Home with a Low Credit Score
It is possible to qualify for a mortgage with a poor credit history. However, your options will be more limited, and your interest rate may be higher to account for lender risk. That said, lenders look at more than just your credit score; they also consider your income, debt-to-income ratio, job stability, and savings.
According to Bankrate, borrowers with lower scores often succeed by applying for FHA, VA, or USDA loans, which have more lenient credit requirements.
Mortgage Loan Options for Low Credit Score Borrowers
FHA LOANS
Backed by the Federal Housing Administration, these loans are designed for low-to-moderate income borrowers.
- Minimum credit score: 500 with 10% down or 580 with 3.5% down.
- Ideal for first-time buyers or those rebuilding their credit score.
- Flexible qualification standards.
VA LOANS
Offered through the U.S. Department of Veteran Affairs, VA loans are available to qualifying veterans, service members, and spouses.
- No minimum credit score set by the VA.
- No down payment required.
- No private mortgage insurance.
USDA LOANS
These loans support rural homebuyers with low-to-moderate incomes.
- No downpayment required.
- No official minimum credit score, but 640 is often recommended.
Non-QM Loans (Subprime Loans)
For buyers who don’t qualify for traditional loans:
- Less strict on credit but come with higher interest rates.
- Best for short-term solutions, not long-term financial health.
How to Improve Your Approval Odds
Even if your score is on the lower end, there are ways to increase your chances of qualifying for a mortgage:
- Make a larger down payment: The more money you put down, the less risky you appear to lenders (Equifax).
- Lower your debt-to-income ratio: Pay off debts or increase your income to reduce this percentage.
- Add a co-signer: A co-signer with a stronger credit can offset your weakness.
- Get pre-approved by multiple lenders: Offers can vary significantly.
- Show stable employment: A strong work history builds lender confidence.
How to Improve Your Credit Before You Apply
If you are not in a rush, a few months of focused credit repair can save you thousands in interest over the life of your loan. Here’s how:
- Pay your bills on time: Payment history is the biggest factor in your credit score.
- Dispute errors on your credit report: Mistakes are more common than you think (Norton Life Lock).
- Lower your credit score balances: Aim for less than 30% credit utilization.
- Don’t apply for new credit lines just before applying for a mortgage.
- Keep older accounts open to maintain credit history length.
According to Equifax, it may take 3 to 6 months to see measurable improvements, depending on the actions taken.
Buy Now or Wait?
This depends on your unique situation. If home prices and rent are rising rapidly in your area, it may be smarter to buy now and refinance later when your credit improves. But if you have time and discipline to improve your credit, you could qualify for better rates in just a few months.
Buying with a low credit score means accepting higher rates, but for some, it still beats throwing away money on rent each month.
Your Credit Score is a snapchat of where you have been, not a life sentence. Whether you are sitting at 580 or working your way up, you have mortgage options. The key is understanding the landscape, getting the right support, and taking smart steps toward financial stability.
Key Takeaways
- Even with a credit score below 620, you may qualify for government-backed loans like FHA, VA, or USDA. These programs are designed to help borrowers with less-than-perfect credit get into a home with reasonable terms.
- Lenders don’t just look at your credit score—they consider your income, job history, debt-to-income ratio, and savings. Strength in these areas can improve your chances of approval, even if your score is on the lower side.
- If you’re not in a rush, taking just 3–6 months to raise your score can lead to better mortgage terms, lower interest rates, and long-term financial savings.
References
Araj, V. (2024, October 15). What credit score do you need to buy a house? Rocket Mortgage. Retrieved May 22, 2025
Bad Credit Mortgages | Getting A Mortgage With Bad Credit. (n.d.). Experian. Retrieved May 22, 2025
Buying a house with bad credit. (n.d.). U.S. Bank. Retrieved May 22, 2025
Can you get a mortgage with bad credit? (n.d.). Lloyds Bank. Retrieved May 22, 2025
Corrons, L. (2024, May 22). How to buy a house with bad credit. Life Lock by Norton
How To Buy A House With Bad Credit. (2025, February 20). Bankrate. Retrieved May 22, 2025
How to Improve Credit Score for Buying a House. (n.d.). Equifax. Retrieved May 22, 2025
What Credit Score Do You Need to Buy a House? – Mortgages. (n.d.). CNBC. Retrieved May 22, 2025
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