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American Focus > Blog > Economy > Can you get a mortgage with bad credit?
Economy

Can you get a mortgage with bad credit?

Last updated: August 4, 2025 12:45 pm
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Can you get a mortgage with bad credit?
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A good to excellent credit score can help you lock in a lower mortgage rate. But what if you have bad credit? Can you still get a mortgage and buy a house? The answer is yes, it is possible to get a mortgage with bad credit, although your options may be more limited and there are potential downsides to consider.

Mortgage lenders may not use terms like “bad” or “terrible” credit, but they do follow the language of the two major credit score models: FICO and VantageScore. According to FICO, a credit score ranging from 580 to 669 is considered fair, while anything below 580 is considered poor. On the other hand, VantageScore categorizes credit scores between 601 and 660 as near-prime and scores between 300 and 600 as subprime, which could result in a denied loan application.

If you have a lower credit score, finding a loan program with competitive interest rates may require more effort. However, there are specialized programs available to help you build credit while applying for a loan, especially if you are buying a house as a primary residence. Some states also offer incentives for first-time homebuyers that can reduce barriers for those with bad credit.

In addition to your credit score, mortgage lenders consider other factors such as your down payment amount, income stability, and outstanding debt levels when determining whether to approve your mortgage application. A larger down payment can signal to lenders that you are a lower-risk borrower and can result in a smaller monthly mortgage payment and less interest paid over the life of the loan. Aim for a debt-to-income (DTI) ratio of 36% or lower to demonstrate healthy debt management and increase lenders’ confidence in your ability to make on-time payments.

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If your credit score is not sufficient to qualify for a mortgage, adding a trusted co-signer or co-borrower to your application might help. Some online mortgage lenders and credit unions have more flexible borrower requirements than traditional banks, making it possible to qualify for a mortgage with a lower credit score. Alternatively, if you don’t have a credit score at all, some lenders may accept proof of on-time payments for items like utility bills as an alternative.

There are specific types of home loans designed for buyers with lower credit scores, such as mortgages insured by the Federal Housing Administration (FHA), which have lower minimum credit score requirements and charge mortgage insurance premiums. VA loans offered by the U.S. Department of Veterans Affairs do not set a minimum credit score requirement, and USDA loans from the U.S. Department of Agriculture have flexible credit score requirements for eligible rural areas.

Conventional loans backed by Fannie Mae and Freddie Mac typically require a minimum credit score of 620, but certain programs for first-time homebuyers or lower-income households may have looser credit score requirements. While it is possible to qualify for a mortgage with a lower credit score, lenders may charge higher interest rates or fees to compensate for the added risk.

In conclusion, while having bad credit may present challenges when applying for a mortgage, it is still possible to buy a house with a lower credit score. By exploring different loan programs, improving your financial profile, and seeking assistance from co-signers or co-borrowers, you can increase your chances of getting approved for a mortgage and achieving your homeownership goals.

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