How to Buy a House with Bad Credit: Your Guide to Success

An mortgage loan application that has been stamped approved for someone with bad credit.

How to Buy a House With Bad Credit in 2025

Buying a home is a big step. For people with bad credit, it can feel impossible—but the good news is: it’s not. Even with a low credit score, there are ways to buy a house, qualify for home loans, and get support to improve your chances.

Let’s break it all down step-by-step so you can feel confident navigating your options—even if your credit score isn’t where you want it to be yet.

What Do Mortgage Lenders Look For?

When you apply for a mortgage loan, mortgage lenders look at your credit report, income, and other financial information. One of the first things they check is your credit score, which comes from data collected by a credit bureau.

Your credit history includes:

  • Your payment history
  • Your credit accounts and balances
  • How much of your available credit you use
  • Any missed payments or defaults

Together, this builds your FICO score, which helps lenders decide if giving you a loan is risky. A bad credit score may not stop you, but it usually leads to a higher interest rate, bigger down payment, or limited loan options.

What are the Credit Score Requirements?

Most lenders follow this scale:

  • Excellent credit: 740+
  • Good credit: 680–739
  • Fair score: 580–679
  • Poor credit: below 580

If you have a low credit score, it doesn’t mean you can’t get a mortgage—it just means you’ll need to work harder to prove you can manage your loan responsibly.

In 2025, most lenders use a minimum credit score requirement of 580 for FHA loans, though some may accept even lower scores with a larger down payment.

Tip: A specific credit score minimum is often listed by lenders. Always ask!

Learn more: What is a good credit score range?

Can You Buy a House With Bad Credit?

Yes! You can still buy a house with bad credit, but you may have to accept:

  • Higher mortgage rates
  • A larger down payment
  • Extra fees, such as mortgage insurance premiums

Some bad credit home loans are designed to help. While you’ll pay more in interest payments, these programs let you start building equity sooner instead of waiting years to boost your credit score.

Bad Credit Home Loan Options

There are multiple loan options available even with poor credit. Let’s break them down:

1. FHA Loans

Backed by the Federal Housing Administration, FHA loans are one of the most common ways to buy a house with bad credit. You can qualify with a credit score as low as 580, and only need a 3.5% down payment.

If your score is lower—between 500 and 579—you can still qualify, but you’ll need a 10% down payment.

  • Lower credit score requirements
  • Great for first-time buyers
  • Allows higher debt load

But: You’ll have to pay mortgage insurance every month and possibly upfront, too.

Learn more from the official HUD FHA loans page.

2. VA Loans

VA loans, backed by the U.S. Department of Veterans Affairs, are available to veterans, active military, and some surviving spouses. They offer:

  • No required down payment
  • No private mortgage insurance
  • Competitive interest rates

While there’s no official minimum credit score, most mortgage lenders prefer 580 or higher. These loans are perfect for buyers with bad credit but strong employment history and income.

Learn more on the VA’s website.

3. USDA Loan

The USDA loan is for buyers in rural or suburban areas. Backed by the U.S. Department of Agriculture, this loan option features:

  • No down payment
  • Low interest rates
  • Income limits (varies by area)

These are great for buyers with a low credit score who meet local income rules. The USDA doesn’t set a minimum credit score, but most lenders prefer at least 640.

4. Conventional Loans

While conventional loans are tougher to qualify for with bad credit, they’re not off the table. These loans require:

  • Higher credit scores (usually 620+)
  • A 5–20% down payment
  • Proof of stable income

Some conventional mortgages have fewer fees than FHA or USDA loans, but may come with a higher interest rate if you have a weaker credit score.

A couple at table with a man seating opposite them focused on buying a house.

How to Improve Your Credit Score Before Applying

The stronger your credit score, the better your chances for a good loan. Even a 20-point improvement can unlock lower mortgage rates.

Steps to Improve a Low Credit Score:

  1. Get your free credit report from all three credit bureaus (AnnualCreditReport.com)
  2. Dispute errors or old accounts hurting your score
  3. Start paying off credit card balances
  4. Catch up on past-due bills to improve your payment history
  5. Avoid new debt or too many hard credit inquiries

You can also build credit with:

  • A secured credit card
  • A credit-builder loan
  • Making consistent payments on utility bills

Pro Tip: Credit.org offers free credit counseling to help with budgeting and improving your credit score.

How Much Should You Save for a Larger Down Payment?

Your down payment is one of the most important parts of buying a home. With bad credit, you may need a larger down payment to offset the risk.

Typical requirements:

  • FHA loans: 3.5% (10% with very low scores)
  • Conventional loans: 5–20%
  • VA loans: 0%
  • USDA loans: 0%

Let’s say you’re buying a $250,000 home:

  • 3.5% = $8,750
  • 10% = $25,000
  • 20% = $50,000

If you don’t have enough, look into down payment assistance programs.

Get Help: Down Payment & Payment Assistance Programs

If saving is hard, you’re not alone. Many people use down payment assistance programs to help cover upfront loan costs.

These include:

  • Local or state grants
  • Employer-sponsored programs
  • Deferred second home loans
  • Nonprofits offering support for bad credit home loans

Some states even offer payment assistance programs that reduce your monthly loan amount.

What to Expect During the Mortgage Application Process

Once you’ve chosen your loan option, your mortgage application will include:

  • Income verification
  • Employment history
  • Credit report review
  • Bank statements
  • Details on credit accounts

The lender will also do a hard credit inquiry, which may lower your score slightly—so avoid applying for other auto loans or credit cards at the same time.

What Are the Risks of Buying With Bad Credit?

Buying a house with bad credit is possible—but it may cost more over time.

Potential drawbacks:

  • Higher interest rate
  • More paid in interest payments
  • Risk of hidden fees
  • Required mortgage insurance

Still, many buyers choose to move forward now, especially if home prices are expected to rise.

Tips for Success When Buying a House With a Bad Credit Score

  • Use a reliable equal housing lender
  • Choose a loan with flexible loan terms
  • Avoid hidden fees
  • Be realistic about your monthly income
  • Stick to a loan size that fits your budget

Every step toward better credit and savings gets you closer to owning a home—even with bad credit.

Conclusion: Yes, You Can Buy a House With Bad Credit

In 2025, more people than ever are buying homes despite having bad credit. Thanks to flexible loan options, payment assistance programs, and smart financial planning, you can buy a house with bad credit and build a stable future.

Whether you’re applying for FHA loans, VA loans, a USDA loan, or even some conventional loans, there are paths forward.

With the right help and preparation, your dream of owning a home is well within reach—even if your credit score isn’t perfect yet.

Helpful Resources:

Jeff Michael
Article written by
Jeff Michael is the author of More Than Money, a debtor education guide for pre-bankruptcy debtor education, and Repair Your Credit and Knock Out Your Debt from McGraw-Hill books. He was a contributor to Tips from The Top: Targeted Advice from America’s Top Money Minds. He lives in Overland Park, Kansas.
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