How to Get a Mortgage with Bad Credit ?
Buying a home is a big milestone—but if you’ve got bad credit, the road to homeownership might feel like an uphill climb. The good news? It’s definitely possible to get a mortgage with bad credit. You just need the right strategy, the right loan, and a little patience.
This guide will walk you through everything you need to know about how to get approved, what types of loans you can apply for, and how to boost your chances even with a low credit score.
What is Considered Bad Credit?
Before we dive into mortgage tips, let’s define what “bad credit” really means. Credit scores range from 300 to 850, and here’s how they generally break down:
- 300 – 579: Poor
- 580 – 669: Fair
- 670 – 739: Good
- 740 – 799: Very Good
- 800+: Excellent
If your score is below 620, most traditional lenders will consider you a risk. But don’t stress—there are still mortgage options available for you.
Can You Really Get a Mortgage with Bad Credit?
Absolutely. While it’s true that bad credit may limit your options or result in a higher interest rate, many lenders offer programs designed specifically for people in your situation.
Factors like your income, job history, savings, and how much debt you already have will also play a big role. If those are strong, your credit score doesn’t have to be perfect.
Steps to Get a Mortgage with Bad Credit
Let’s break it down step-by-step so you can confidently move toward getting that mortgage approval.
- Check Your Credit Report
Start with the basics: Get a copy of your credit report from all three major bureaus (Equifax, Experian, and TransUnion). You can get them for free at AnnualCreditReport.com.
Look for:
- Mistakes (like accounts that aren’t yours)
- Late payments that may be removed
- Collection accounts you can resolve
Dispute any errors to potentially raise your score quickly.
- Try to Boost Your Score Before Applying
Even if you only have a few months, small changes can make a big difference:
- Pay down credit cards (especially if you’re using over 30% of your limit)
- Avoid opening new credit lines
- Set up automatic payments to avoid any missed bills
Some people see credit score jumps within 30–60 days just by reducing their debt.
- Save for a Bigger Down Payment
A larger down payment can make lenders feel more comfortable. The more money you put down, the less risk you pose.
With bad credit, putting down 10–20% may help you get approved or lower your interest rate.
- Look into Government-Backed Loans
Government-backed loans are your best bet when credit is an issue. Here’s a quick breakdown:
- FHA Loans: Available for credit scores as low as 500 (with 10% down). With a 580+ score, you can put down just 3.5%.
- VA Loans: For veterans and active military. No minimum credit score required by the VA, though lenders may set their own standards.
- USDA Loans: Designed for rural areas. No minimum score set by the USDA, though most lenders look for 640 or higher.
These loans are more flexible and forgiving than conventional loans.
- Get Pre-Approved Before House Hunting
A pre-approval gives you a clear picture of how much you can afford and proves to sellers you’re serious.
During this process, lenders will:
- Review your credit
- Check your income and employment
- Calculate your debt-to-income ratio
Even with bad credit, a pre-approval can strengthen your offer on a home.
- Compare Multiple Lenders
Don’t go with the first lender you find. Shopping around can save you thousands in interest.
Different lenders have different credit score requirements. Some specialize in working with people who have lower credit scores or past financial issues.
Tips to Strengthen Your Application
Add a Co-Signer
If you have a trusted friend or family member with good credit, having them co-sign the mortgage can improve your chances. Just remember—they’re equally responsible for the loan.
Prove Steady Income
Even with bad credit, showing that you have a stable income and a low debt-to-income ratio can be a huge plus.
Write a Letter of Explanation
If your credit score dropped due to a one-time issue (like a medical emergency or layoff), write a letter explaining your situation. Many lenders will take this into account.
What to Expect with a Bad Credit Mortgage
You’ll likely face:
- Higher interest rates
- Bigger down payment requirements
- Private Mortgage Insurance (PMI) until you reach 20% equity
These things cost more upfront, but they don’t last forever—and they can help you become a homeowner now.
Can You Refinance Later?
Yes! Many people start with a high-interest mortgage due to bad credit and refinance later when their credit improves. Refinancing can:
- Lower your monthly payments
- Remove PMI
- Get you a much better interest rate
FAQs
- What’s the minimum credit score needed for an FHA loan?
You can qualify with a score as low as 500, but you’ll need 10% down. With 580+, you only need 3.5% down.
- Can I get a mortgage with no down payment and bad credit?
It’s very rare, but VA and USDA loans offer zero down options. However, credit and eligibility criteria still apply.
- How fast can I raise my credit score?
In as little as 30 days, you could see improvement by paying down credit cards, fixing report errors, or becoming an authorized user on someone else’s account.
- Will applying for a mortgage hurt my credit?
A single mortgage application causes a small dip. But if you apply with multiple lenders within 14–45 days, it’s usually treated as one inquiry.
- Should I wait to improve my credit before applying?
If you can wait, even a small score boost can save you money. But if home prices or interest rates are climbing, it might make sense to buy now and refinance later.
Conclusion
Getting a mortgage with bad credit is challenging—but far from impossible. By taking steps to improve your credit, exploring government loan options, and working with the right lender, you can still buy your dream home.
It may cost more upfront, but with careful planning, you’ll build equity, improve your credit, and refinance into better terms down the line. The key is to start now, stay informed, and be prepared.
