How to Get Home Loans for Bad Credit
There’s a wide range of mortgage programs offering home loans for bad credit, and many lenders are willing to take a chance on borrowers with credit blemishes. So you can breathe easy: bad credit likely won’t outright prevent you from getting a home loan.
Below, we cover how a weak credit score (579 or lower) will influence the types of loans you qualify for, your interest rate and the steps you may need to take before buying a home. We’ll also help you decide whether you should get a bad credit home loan now or wait to improve your score.
Do home loans for bad credit exist?
Yes, it’s very possible to get a mortgage even if you have bad credit. We’ll cover the loan programs available to you.
Your credit score is important to lenders, but it isn’t the be-all, end-all. Lenders view your score in the context of your specific circumstances. In fact, conventional loan guidelines no longer use a strict 620 credit score minimum as of late 2025 (though many lenders still do). And government-backed mortgages don’t set a hard credit minimum either.
| Credit score range | Borrower classification | What to expect |
|---|---|---|
| 780 and above | Optimal | The lowest possible closing costs and interest rates |
| 740 and above | Superprime | The lowest possible interest rates |
| 720 and above | Superprime | Good odds of being approved for most loans |
| 680 and above | Prime | Good odds of being approved for most loans |
| 620 to 679 | Nonprime | Less likely to be approved for a loan and may see higher interest rates and lower loan amounts |
| 540 to 619 | Subprime | May struggle to get approved for a loan |
| 539 and below | Deep subprime | May struggle to get approved for a loan |
Using the FICO scoring system, a bad credit score is any score in the 300 to 579 range. The average score in the U.S. is currently 715.
“Bad credit” is also used to describe a score near the minimum allowed for a particular loan program, or a person who has negative credit events — like late payments, loan default or bankruptcy — on their credit report.
There are three major credit bureaus — Equifax, Experian and TransUnion — and multiple types of credit scores. However, most lenders use the FICO Score, created by Fair Isaac Corporation.
Here’s a look at the classifications of FICO Scores:
| Credit score range | Rating |
|---|---|
| 800-850 | Exceptional |
| 740-799 | Very good |
| 670-739 | Good |
| 580-669 | Fair |
| 300-579 | Poor |
Learn more about how to improve your credit score.
Best home loans for bad credit: Compare 5 programs and their requirements
| Loan program | Minimum credit score | Possible to qualify without traditional credit? | Minimum down payment | Maximum DTI ratio* | |
|---|---|---|---|---|---|
| FHA loans | 500 |
| 43% | ||
| VA loans | None, but many VA loan lenders set a minimum in the range of 500 to 620 | 0% for borrowers with full entitlement | No set maximum, but many lenders look for a ratio no higher than 41% | ||
| USDA loans | None, but many lenders look for 640 | 0% | 41% to 44% | ||
| Conventional: Fannie Mae HomeReady® loans | None, but lenders traditionally look for 620 | 3% | 45% | ||
| Conventional: Freddie Mac Home Possible® loans | None, but lenders traditionally look for 660 | 3% | 36% to 45% |
Best bad credit mortgage lenders
| Lender | Good option for: | Minimum credit score | Minimum down payment | LendingTree rating |
|---|---|---|---|---|
 | FHA borrowers with low credit scores | 500 | 3.5% | 
|
 | FHA borrowers with low credit scores | 540 | 3.5% |
|
 | FHA borrowers with low credit scores | 550 | 3.5% | 
|
 | VA borrowers with low credit scores | 580 | 0% for borrowers with full entitlement | 
|
 | VA borrowers with low credit scores | 580 | 0% for borrowers with full entitlement |
|
 | VA borrowers with low credit scores | 580 | 0% for borrowers with full entitlement | 
|
Find the best. Read LendingTree’s lists of the best mortgage lenders or best FHA lenders.
How to get a home loan with bad credit: 8 steps
Here are eight steps you can take to increase your odds of landing a mortgage preapproval when you have a low credit score:
1. Understand what’s on your credit reports
Inaccurate information can sometimes show up on your credit reports. Take the initiative to request a copy of your credit reports from the three main credit bureaus at AnnualCreditReport.com and review them for errors before looking into bad credit home loans.
2. Remove errors and paid-off debts from your credit report
If you spot any incorrect information on your credit report, you can follow these procedures to submit disputes and get the errors removed. If you’ve had payments sent to collections in the past, they may still be on your report as well — even if you’ve paid them off.
In some cases, you can request that the lender remove the entry from your credit report, or offer to pay a still-outstanding debt in return for having it immediately removed. Your creditor doesn’t have to agree, but sometimes it will.
3. Increase your down payment
Putting more money down can go a long way toward getting a mortgage approval, as it helps demonstrate to lenders that you’re a less risky borrower. In the case of FHA loans, a higher down payment means you can qualify with a 500 credit score. Increasing your down payment can also improve your mortgage rate and lower your closing costs.
Crafting a budget to find ways to cut expenses or picking up a side hustle to generate more income can help you save for a larger down payment. You should also consider committing any lump sums you receive, like tax refunds or bonuses, toward your down payment. Finally, if you have loved ones who may be willing and able to help, you can always ask them to gift money toward your home purchase.
4. Pay down debt and lower your DTI ratio
One factor lenders consider when deciding whether to approve you for a loan is your debt-to-income (DTI) ratio. Your DTI ratio is calculated by dividing your total debt, including your mortgage payment, by your gross monthly income. Ideally, when you’re buying a house with bad credit, you’ll want to shoot for a ratio that’s no greater than 36%. DTI requirements do vary by loan and lender, however, and often sit in the 41% to 50% range.
Strategies to lower your DTI ratio include paying down some of your debts, increasing your income or getting a mortgage cosigner.
5. Focus on a track record of on-time payments
Your payment history accounts for 35% of your FICO Score. As such, maintaining a flawless payment history is one of the best ways to improve your credit score and increase your chances of getting a home loan with bad credit. If you have a pattern of making late payments, you may want to wait before applying for a mortgage to minimize the impact on your loan terms.
6. Shop around for lenders
When searching for bad credit mortgage lenders, keep in mind that borrower requirements and rates will vary between types of lenders. For example, a local credit union may have more forgiving terms than a national bank, while an online lender may have a proprietary loan program you could qualify for. Be sure to consider options from multiple lenders and compare rates and terms when shopping for a mortgage.
7. Find a cosigner or co-borrower
Not all loan programs allow it, but, in some cases, you can use a cosigner or co-borrower to boost your income — this can have a major effect on your DTI ratio and the loan amount you qualify to borrow. FHA loans, for example, usually require that borrowers live in the home they purchase, but will allow you to use the income of an out-of-state co-borrower or cosigner to qualify for a mortgage — even though they won’t be living in the home with you.
8. Seek a lower loan amount
One way to make qualification easier is simply to aim a little lower on your preferred loan amount. One popular option, especially in nonurban areas, is a manufactured home. Modern manufactured homes can look surprisingly similar to site-built homes and cost around $79 less per square foot, compared to a typical site-built home.
Learn more about buying a manufactured home.
Should you get a bad credit home loan or wait?
Depending on your circumstances, waiting and improving your credit score instead of buying a house with bad credit could result in significant savings.
When you’re buying a home with bad credit, you’re seen as a bigger risk in the eyes of lenders. To offset that risk, lenders typically charge a higher interest rate than they would charge someone with excellent credit. The differences between credit score ranges can translate to tens of thousands of dollars in extra interest charges over the life of the loan.
Example scenario
Here’s an example of how a low credit score can impact the interest rate and total interest paid on a $350,000, 30-year fixed-rate mortgage.
| Credit score | APR | Monthly payment (principal and interest only) | Total interest paid | Monthly savings over next lowest credit tier | Total interest savings over next lowest credit tier |
|---|---|---|---|---|---|
| 760-850 | 6.378% | $2,184 | $436,323 | $59 | $21,301 |
| 700-759 | 6.635% | $2,243 | $457,624 | $34 | $12,208 |
| 680-699 | 6.781% | $2,277 | $469,832 | $15 | $5,122 |
| 660-679 | 6.781% | $2,292 | $474,954 | $29 | $10,707 |
| 640-659 | 6.842% | $2,321 | $485,661 | $37 | $13,395 |
| 620-639 | 7.127% | $2,358 | $499,056 | $0 | $0 |
Try using LendingTree’s mortgage calculator to estimate your monthly payment:
Frequently asked questions
Applying for a government-backed loan program is typically the easiest way to qualify for a mortgage with low credit. FHA and VA loans in particular come with forgiving credit minimums, shorter wait times after bankruptcy or foreclosure and competitive interest rates.
Yes, in fact you can qualify for any of the loans in our list of the five best home loans for bad credit with a 500 credit score. However, of those loan options, you will have the easiest time qualifying for an FHA or VA loan with a 500 score. These loans can come with some drawbacks — typically higher interest rates or higher APRs (or both). Plus, in the case of an FHA loan, you’ll have to make at least a 10% down payment if you have a credit score between 500 and 579.
You might pay more, but only indirectly. There won’t be an extra line item added to penalize borrowers with bad credit but, in some cases, your costs may be higher if you have bad credit. For example, if you’re paying a steeper interest rate because your credit score is low, your prepaid interest charge may come out to more than it would have for someone paying a lower interest rate.
You should also keep in mind that your closing costs will depend on your loan type, the home’s purchase price and other factors. For example, VA loan borrowers pay a funding fee, while FHA loan borrowers pay an upfront mortgage insurance premium.
Buying a house with bad credit doesn’t automatically mean you’ll pay higher mortgage insurance premiums. Your loan type and down payment will largely determine how expensive your mortgage insurance will be. For example, all FHA loans come with two types of mortgage insurance premiums, which are based on your loan amount, LTV ratio and location — your credit score doesn’t play into that calculation.
Conventional loan borrowers who put down less than 20% will pay a similar fee, called private mortgage insurance (PMI). However, in this case, your credit score is a factor in determining how expensive it will be.
Having a cosigner on a home loan is possible, but asking someone to be a cosigner is a decision that shouldn’t be taken lightly. This person will be on the hook for your loan if you miss payments, which puts their creditworthiness at risk.
Yes, you can refinance a bad credit mortgage, but whether it’s worth it depends on your specific loan terms. If your credit has improved since buying a home with bad credit, and interest rates haven’t gone up significantly in that time, you may qualify for a lower rate or a mortgage with better loan terms. Keep in mind that you’ll have refinance closing costs, too, which will add to the cost of getting into that new mortgage.
Yes, you can get a mortgage after filing for bankruptcy. However, you’ll first need to go through a waiting period — this can range from one to four years, depending on the loan program and type of bankruptcy you filed.
If you’ve had a mortgage foreclosure, you’ll have to wait longer than you would after any other credit issue. Foreclosure waiting periods range from two to seven years. If, however, extenuating circumstances led to the foreclosure, such as an illness or job loss affecting the household’s breadwinner, there might be exceptions allowing you to get a loan sooner.
View mortgage loan offers from up to 5 lenders in minutes