📊 Your Options by Credit Score
500-579 Credit Score
Very LowThis is challenging but not impossible. Your main option is FHA with 10% down.
Your Options:
- ✓ FHA Loan - 10% down required
- ✓ Non-QM Loans - Higher rates, more flexible
- ✓ Rent-to-Own - Build credit while renting
- ✗ Conventional loans - Not available
💡 Recommendation: Spend 3-6 months improving credit to reach 580+
580-619 Credit Score
LowMore options open up at 580. FHA only needs 3.5% down at this level.
Your Options:
- ✓ FHA Loan - Only 3.5% down!
- ✓ VA Loan - Some lenders accept 580+
- ✓ Non-QM Loans - More flexibility
- ✗ Conventional loans - Need 620+
620-659 Credit Score
FairAt 620, conventional loans become available. You have many more options.
Your Options:
- ✓ Conventional Loan - 3-20% down
- ✓ FHA Loan - 3.5% down
- ✓ VA Loan - 0% down (if eligible)
- ✓ USDA Loan - 0% down (rural areas)
🏛️ FHA Loans: The Best Option for Bad Credit
FHA loans are specifically designed to help borrowers with lower credit scores become homeowners. Here's why they're your best bet:
✅ FHA Advantages
- • Accept 500+ credit scores
- • Only 3.5% down (at 580+)
- • Lower interest rates than non-QM
- • Gift funds allowed for down payment
- • Seller can pay closing costs
- • More lenient on past credit issues
⚠️ FHA Considerations
- • Mortgage insurance required (MIP)
- • MIP lasts life of loan (<10% down)
- • Property must meet FHA standards
- • Loan limits apply by county
- • Primary residence only
- • Stricter appraisal requirements
🎯 Check Your FHA Eligibility
Even with a 500 credit score, you may qualify for an FHA loan. Find out in minutes!
Check FHA Eligibility →💰 What to Expect with Bad Credit
| Credit Score | Expected Rate* | Down Payment | Monthly Payment** |
|---|---|---|---|
| 500-579 | 7.5-8.5% | 10% ($35,000) | $2,523-$2,696 |
| 580-619 | 7.0-7.5% | 3.5% ($12,250) | $2,564-$2,661 |
| 620-659 | 6.5-7.0% | 3-5% | $2,466-$2,564 |
| 740+ (for comparison) | 5.5-6.0% | 3-20% | $2,176-$2,271 |
*Estimated 2026 rates. **Based on $350,000 home, 30-year fixed.
💸 The Cost of Bad Credit
A 500 score vs. 740 score on a $350K home = $347-$520 more per month and $125,000-$187,000 more over 30 years. Even small credit improvements can save you tens of thousands!
📈 How to Improve Your Chances
1. Save a Larger Down Payment
More money down = less risk for the lender = better approval odds. If you can put 10-20% down, you'll have more options even with bad credit.
2. Show Strong Income & Employment
Stable employment (2+ years) and strong income can offset credit concerns. Lenders want to see you can afford the payments.
3. Have Cash Reserves
Having 2-6 months of mortgage payments in savings shows you can handle emergencies. This is a strong compensating factor.
4. Add a Co-Borrower
A spouse, partner, or family member with better credit can strengthen your application. Their income and credit help qualify.
5. Write a Letter of Explanation
If your bad credit was due to a specific event (medical emergency, job loss, divorce), explain it. Lenders consider circumstances.
6. Work on Your Credit First
Even 3-6 months of credit improvement can make a huge difference. Pay down cards, dispute errors, and avoid new credit.See credit improvement tips
🏦 Lenders That Work with Bad Credit
Not all lenders work with low credit scores. Here are types of lenders to consider:
FHA-Approved Lenders
Specialize in FHA loans and are used to working with lower credit scores.
Find FHA lenders →Credit Unions
Often more flexible than big banks. May offer manual underwriting for unique situations.
Non-QM Lenders
Specialize in borrowers who don't fit traditional guidelines. Higher rates but more flexible.
Mortgage Brokers
Work with multiple lenders and can find options for challenging situations.
Compare options →❓ Bad Credit Mortgage FAQ
What's the lowest credit score to buy a house?
FHA loans accept scores as low as 500 (with 10% down) or 580 (with 3.5% down). Some non-QM lenders go even lower, but with much higher rates.
How long after bankruptcy can I get a mortgage?
Chapter 7: 2 years for FHA, 4 years for conventional. Chapter 13: 1 year into repayment plan for FHA (with court approval), 2 years after discharge for conventional.
Can I get a mortgage after foreclosure?
Yes, after waiting periods: FHA requires 3 years, conventional requires 7 years. Extenuating circumstances may shorten these periods.
Should I wait to improve my credit first?
If you're close to a threshold (like 575 when 580 gets better terms), spending 2-3 months improving credit is worth it. But don't wait forever—home prices rise too.
🏠 Bad Credit Doesn't Mean No Home!
Millions of people with less-than-perfect credit buy homes every year. Check your options today—you might be surprised what you qualify for!