This article contains affiliate links. If you click through and make a purchase, I may earn a small commission at no extra cost to you. Full disclosure.

If you have a low credit score and you're worried it means homeownership is out of reach, take a breath. It's not. Buying a home with bad credit is harder than buying with great credit, but it's absolutely possible. Many first-time buyers do it.

This guide covers what counts as "bad credit," which loan programs accept lower scores, the real costs of buying with poor credit, and the smartest strategies for moving forward.

What Counts as "Bad" Credit?

Credit score ranges generally break down as follows:

For mortgage purposes, lenders typically consider anything below 620 to be "low credit." Anything below 580 puts you in the "subprime" category, which severely limits your options.

But here's what matters: even with a credit score in the 500s, you have options. Let's look at each one.

Loan Programs for Lower Credit Scores

FHA Loans: The Most Accessible Path

The Federal Housing Administration insures loans for borrowers who might not qualify for conventional financing. FHA loans are the most popular option for buyers with lower credit scores.

FHA credit requirements:

FHA loans require mortgage insurance, but they're often the only realistic path for buyers with credit challenges. The loan limits vary by county, ranging from $541,287 in low-cost areas to $1,249,125 in high-cost areas in 2026.

VA Loans: For Veterans and Active Military

If you've served in the military, VA loans offer remarkable benefits for buyers with lower credit:

VA loans are arguably the best mortgage option in the country if you qualify. If you have any military service, check your eligibility before exploring other options.

USDA Loans: For Rural and Some Suburban Properties

USDA loans are designed for buyers purchasing homes in eligible rural and suburban areas. Many areas you wouldn't think of as "rural" actually qualify.

Check the USDA eligibility map for your target area before assuming you don't qualify. Many parts of Florida that feel suburban actually meet USDA requirements.

Conventional Loans with Lower Credit

Conventional loans typically require a 620 minimum credit score, but some programs accept lower scores. Fannie Mae's HomeReady and Freddie Mac's Home Possible programs still generally require a 620 minimum score, but they make qualifying easier at that level through lower down payments and reduced mortgage insurance when other factors are strong.

These loans require private mortgage insurance (PMI) for down payments below 20%, but PMI can be removed once you reach 20% equity, unlike FHA mortgage insurance. If you're weighing your choices, our guide to FHA vs conventional loans breaks down which fits different credit situations.

💡 Want the complete picture?

My free First-Time Homebuyer Guide covers everything you need to know before buying your first home: credit prep, financing, common mistakes, and the step-by-step buying process.

→ Download the Free Guide

The Real Costs of Buying With Bad Credit

Lower credit scores don't just affect whether you can get a loan. They significantly affect what that loan costs you over time.

Interest rate impact:

On a $300,000 30-year mortgage, the difference between a 740 credit score and a 620 credit score can be 1.5% or more in interest rate. That translates to:

Mortgage insurance:

Lower credit scores often mean higher mortgage insurance premiums, especially with conventional loans. FHA mortgage insurance is the same regardless of credit score, but it stays for the life of the loan in most cases.

Additional costs:

These costs are real, but they shouldn't necessarily stop you from buying. They should inform your decision and motivate you to improve your credit when you can.

Should You Wait to Improve Your Credit Before Buying?

This depends on your specific situation. Here's how to think about it:

Buy now if:

Wait to improve your credit if:

How to Strengthen Your Application

Even with bad credit, you can make yourself a stronger borrower:

1. Lower Your Debt-to-Income Ratio

Lenders look at how much of your monthly income goes to debt payments. The lower this percentage, the more attractive you are. Pay down credit card balances and avoid taking on new debt before applying for a mortgage.

2. Save a Larger Down Payment

A bigger down payment reduces the lender's risk and can offset credit concerns. It also reduces your loan amount, which means lower monthly payments.

3. Show Stable Employment History

Two years of consistent employment in the same field is the gold standard. If you've changed jobs, lenders want to see that you've stayed in the same industry.

4. Document Your Reserves

Having 3 to 6 months of mortgage payments in savings after your down payment makes you a much stronger borrower. Lenders love reserves.

5. Address Credit Issues Directly

Before applying, get a copy of your credit report and:

6. Consider a Cosigner

If you have a family member with strong credit willing to cosign, this can dramatically improve your loan terms. But understand: this person is taking on real risk, and your missed payments will hurt their credit.

Down Payment Assistance Programs

If your credit is challenging, your savings may also be limited. Florida has multiple programs that can help with down payments and closing costs:

For a full rundown of what's available in the state, see our guide to Florida down payment assistance programs.

Most assistance programs require a homebuyer education course, which is generally a good idea anyway.

Working With the Right Lender

Not all lenders work the same way with lower credit scores. Some specialize in FHA and VA loans for buyers with credit challenges. Others won't touch a loan below 680.

When shopping lenders:

A lender who specializes in lower-credit borrowers will often find approval paths that a traditional lender wouldn't.

The Refinance Strategy

Here's an underused strategy: buy now with the credit you have, then refinance once your credit improves. If you buy with a 620 credit score at 7.5% and your credit climbs to 720 over the next two years, you may be able to refinance at 6.25% or better, saving significant money on the loan you already have.

Rules of thumb for refinancing:

Final Honest Take

Bad credit doesn't disqualify you from homeownership. It just means you need to be strategic, patient, and realistic about what you can afford.

The path forward usually involves:

  1. Understanding exactly what your credit looks like
  2. Identifying which loan program fits your situation
  3. Strengthening your overall application
  4. Working with the right lender
  5. Having a long-term plan to improve your credit and refinance later

Home ownership remains one of the best ways to build long-term wealth. Don't let credit challenges keep you sitting on the sidelines if buying makes financial sense in other ways.

The best time to start is by knowing exactly where you stand and what your options are. Pull your credit report, calculate your debt-to-income ratio, and start the conversation with a lender who specializes in lower-credit borrowers.

Frequently Asked Questions

What is the lowest credit score you can have to buy a house?

It depends on the loan. FHA loans allow scores as low as 580 with 3.5% down, or 500 to 579 with 10% down. Conventional loans typically want at least 620, and USDA lenders usually look for 640. VA loans set no official minimum, though most lenders prefer 580 to 620.

Can I buy a house with a 500 credit score?

Yes, but your options are narrow. An FHA loan can work with a score between 500 and 579 if you put down at least 10%. Below 500 you are not eligible for FHA financing and will likely need to rebuild your credit first.

Should I wait to improve my credit before buying a home?

It depends on your situation. Buying now can make sense if your credit issues are stable, your income is steady, and you plan to refinance once your score improves. Waiting makes more sense if you're in active financial distress, have a high debt-to-income ratio, or can realistically raise your score meaningfully in the next 6 to 12 months.

Does bad credit make a mortgage more expensive?

Yes. A lower score usually means a higher interest rate and, in many cases, higher mortgage insurance, which adds up over the life of the loan. That cost is one reason buyers often buy now and refinance later once their credit recovers.

If you're unsure where your number stands relative to these thresholds, start with our guide to what credit score you really need to buy a house.

Sources

The figures in this article were verified against the authoritative sources below. Rules, rates, and limits change over time, so confirm the current details with the agency or a licensed professional before you act.