Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
Bad credit doesn't rule out a mortgage. FHA allows a 580 score at 3.5% down, or a score as low as 500 with 10% down, though many individual lenders set their own floor around 600-620 on top of FHA's minimum.
Key takeaways
A low credit score doesn't rule out a mortgage — FHA accepts scores as low as 500 with 10% down, or 580 with 3.5%.
Many individual lenders layer their own overlay on top of FHA's floor, often requiring 600-620 even though the program allows less.
Expect a higher interest rate and possibly a larger down payment than a well-qualified borrower would pay for the same loan.
Refinancing once credit improves is a common strategy, letting buyers get into a home now and lower the rate later.
Min. down payment
3.5% (580+), 10% (500-579)
Min. credit score
500 FHA floor; 600-620 common overlay
Key cost
Higher rate, sometimes more down
Best for
Buyers who need a path now, not in a year
Today's FHA 30-year rate6.35%avg · Optimal Blue OBMMI · as of Jun 27, 2026
Estimated monthly payment at today's rate
Loan amount
Monthly P&I
$250,000
$1,556/mo
$400,000
$2,489/mo
$600,000
$3,733/mo
Principal & interest only, 30-year term at 6.35%. Taxes, insurance and any mortgage insurance are extra. See today's rates →
How bad-credit mortgages work
"Bad credit" isn't one category — where your score falls changes which programs are even on the table. FHA sets two published tiers, while VA and USDA set no statutory minimum at all.
580+: FHA at 3.5% down
500-579: FHA at 10% down
VA / USDA: no federal floor, but lenders apply their own overlay
Most banks won't actually go to FHA's 500 floor — they add an overlay of their own, commonly 600-620, because they carry extra risk on paper even with FHA's insurance backing.
What a lower score actually costs you
A weak score doesn't just raise your rate — it can also push your required down payment higher and shrink your list of willing lenders.
Non-QM and bank-statement loans, built for recent bankruptcy, foreclosure, or self-employed income that won't fit standard underwriting, cost the most: a materially higher rate plus a larger down payment than FHA requires.
Pull your credit reports and dispute any errors
Pay down revolving balances toward 30% utilization or lower
Keep every account open and current for several months
Re-check your score before applying
The math to run
A few months spent lowering credit-card balances can move a score enough to change your rate tier. Compare that savings against the cost of waiting before assuming you need to apply today.
Who a bad-credit mortgage path fits
These paths suit buyers who can't wait out a credit repair timeline — a growing family, a lease ending, or an area where rents are climbing faster than they can save.
A score in the FHA range who can't reach 620 soon
A veteran or rural buyer relying on VA or USDA
Someone past a bankruptcy or foreclosure needing non-QM financing
Self-employed borrowers whose tax returns understate real income
If your timeline is flexible, raising your score first is usually the cheaper move — it widens your lender options and can lower both your rate and your required down payment.
Bad-Credit Mortgages: pros and cons
Pros
Homeownership possible without a top-tier credit score
FHA accepts scores as low as 500
Non-QM options for recent bankruptcy or foreclosure
Rebuilding credit later can lower your rate via refinance
Cons
Higher interest rates than well-qualified borrowers get
Larger down payment often required below 580
Fewer lender options at the low end
Mortgage insurance costs run higher with weaker credit
Zero-down options if your credit is still rough
A low score doesn't rule out $0 down, but it narrows the path to two government programs.
VA loans: zero down, no minimum score set by VA itself, but lenders often want 580-620
USDA loans: zero down in eligible rural/suburban areas, similar lender-set score floors
FHA: not zero-down, but the lowest down payment (3.5%) at a workable score
Requirements at a glance
580 credit score for FHA's 3.5%-down minimum
500-579 score still qualifies for FHA, with 10% down
VA and USDA set no statutory minimum, but individual lenders apply their own
Non-QM or bank-statement options for recent bankruptcy, foreclosure, or self-employed income
Expect a higher rate and more scrutiny at the lower end of any range
Two years of income history, even if documented non-traditionally
In narrow cases, yes. FHA permits a 500 score with 10% down, but relatively few lenders actually offer it, and most set their own floor around 600-620 instead. VA and USDA loans have no federal minimum but carry similar lender overlays.
Is it better to wait and raise my credit score first?
Often, yes. A few months of paying down revolving balances and correcting report errors can move a score enough to open lower rates and more lenders. If your timeline allows it, run the numbers before applying with a low score.
What is a non-QM or bank-statement loan?
It's a mortgage underwritten outside standard rules, using bank statements or asset totals instead of tax returns to verify income.
It suits self-employed borrowers or those with a recent bankruptcy or foreclosure, but it comes with a higher rate and larger down payment.
What is the easiest mortgage to get with bad credit?
For most borrowers, that's an FHA loan — it accepts scores as low as 580 for 3.5% down, or 500 with 10% down, and forgives past late payments more than conventional loans do.
Non-QM and bank-statement loans go lower still but usually cost more in rate and fees. html">FHA loans.
Can I get a mortgage with really bad credit?
Yes, though your options narrow below a 500 score. FHA is generally the floor for traditional financing, requiring at least 500 with 10% down, while non-QM and bank-statement lenders sometimes work with borrowers who have recent bankruptcies or foreclosures, at higher rates.
Rebuilding credit for even a few months before applying often opens meaningfully better pricing.
Do FHA loans work with bad credit?
Yes — FHA is the main government-backed program built for weaker credit, accepting scores as low as 580 for 3.5% down and 500 for 10% down.
Lenders still layer their own overlays on top of FHA's minimums, so actual approval often depends on the specific lender as much as the FHA floor itself.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
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