How to Buy a House with Less-Than-Perfect Credit

If you have bad credit, that doesn’t mean you have to give up on your dream of owning a house. Lenders look at the big picture and approve mortgages for borrowers with less-than-ideal credit.

What Factors Do Mortgage Lenders Consider?

A borrower’s credit history helps a lender assess risk. Scores fall along a spectrum and are characterized as “poor,” “fair,” “good,” “very good,” and “excellent.”

Borrowers who have made payments on time and used credit responsibly generally have higher credit scores. They’re more likely to get approved for loans with competitive interest rates.

Every lender has its own criteria that it uses to evaluate mortgage applications. Some only give loans to borrowers with credit scores at or above a specific threshold, while others are more flexible.

How Can You Get a Mortgage with a Low Credit Score?

Bad credit can make a lender view you as risky, but other factors can work in your favor. Here are some ways to boost a lender’s confidence that you’ll be able to handle a mortgage:

• Make a substantial down payment 

• Lower your debt-to-income ratio

• Save enough money to cover several months of mortgage payments

• Have a family member or friend cosign your loan application

Some Notes on Getting a Cosigner

First of all, make sure you understand what the term means. A cosigner is someone who doesn’t plan to live in the house and who won’t own or co-own it. A co-applicant (or co-borrower) is a person, such as a spouse or domestic partner, who plans to live in the home and who will jointly own it.

If someone cosigns your mortgage application, the lender will consider that person’s income and credit, in addition to yours. If the lender approves the application, the loan will be in your name, and you will be expected to make the monthly payments. The cosigner agrees to repay the mortgage if you don’t.

Before you ask someone to cosign, think about the burden it would place on that person and how it might affect your relationship. If a loved one helps you out, but you don’t keep up with your mortgage payments, that person will get stuck with your debt.

The cosigner’s entire family can suffer, and your relationship can be severely damaged or destroyed. The situation can also affect your relationships with other relatives or friends. Don’t ask someone to cosign your loan application unless you’re confident that you’ll be able to pay the bills.

What Kinds of Mortgages Are Available to Borrowers with Bad Credit?

The Federal Housing Administration (FHA) offers loans with lower credit score requirements than conventional loans. In 2026, a borrower with a FICO score of at least 580 must make a down payment of at least 3.5%, and a borrower with a score between 500 and 579 must put down at least 10%. Additional requirements apply to FHA mortgages.

Active-duty service members, veterans, and surviving spouses can apply for a loan through the Department of Veterans Affairs. There’s no minimum credit score for a VA mortgage, but lenders that offer VA loans have their own requirements.

If you would like to purchase a home in a rural area, you can apply for a mortgage through the Department of Agriculture. The USDA doesn’t set a minimum credit score for mortgages, but lenders that provide USDA loans can have minimum score requirements. Income limits and other restrictions apply.

Fannie Mae and Freddie Mac are government-sponsored enterprises that buy conventional conforming mortgages from lenders. In 2025, Fannie and Freddie stopped requiring borrowers to meet strict minimum credit score guidelines. Credit is still important, but loan decisions are now based on a broader range of factors.

Dozens of lenders have begun using VantageScore 4.0 and FICO 10T models that track changes in an applicant’s credit over time. Those scoring models also consider alternative credit data, such as rent and utility payments, that aren’t factored into traditional credit scores. These changes make it possible for more people to qualify for mortgages, but some lenders still use traditional credit scores and have strict cut-offs.

Should You Buy a House Now or Improve Your Credit First?

It’s possible to buy a house with a low credit score, but you might have to make a large down payment, pay a higher interest rate, and pay higher fees for mortgage insurance. If you wait and work on boosting your credit, you’ll have more options and might be able to save thousands of dollars over the life of the loan. You can get tips on how to improve your credit here.

Where Can You Learn More about Buying a House?

The process of buying a home is complex and often confusing. If you’re not familiar with how things work, you might spend more than you should or run into a problem that could have been avoided.

The First-Time Homebuyer Masterclass breaks it all down and explains each part of the process. You’ll learn about the role of credit, how to choose the right mortgage, and a lot more. Enroll today.

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