# How to Get a Mortgage with Bad Credit By Opendoor Editorial Team | 2026-05-29 # How to Get a Mortgage with Bad Credit A low credit score doesn't disqualify you from buying a home — it changes which loans you qualify for and what rate you'll pay. FHA loans accept credit scores as low as 580 with just 3.5% down, and [VA loans have no government-set minimum](https://www.va.gov/housing-assistance/home-loans/) (lenders typically require 580–620). If you've been wondering whether you can get a mortgage with bad credit, the short answer is yes — but getting there takes some strategy. Below you'll find the loan programs that work for buyers with lower credit scores, the thresholds you need to know, and concrete steps to improve your approval odds. If you're unsure where you stand, start by learning [what credit score you need to buy a house](/articles/credit-score-to-buy-a-house). ## What Counts as "Bad Credit" for a Mortgage? Credit scores range from 300 to 850, and what lenders consider "bad credit" depends on the loan program. The [Consumer Financial Protection Bureau (CFPB) defines credit scores](https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/) as a numerical summary of your credit report, used by lenders to gauge risk. Here's a general breakdown of how the mortgage industry views FICO ranges: - **740 and above:** Excellent — best rates and terms - **670–739:** Good — qualifies for most programs - **620–669:** Fair — meets conventional minimums but with higher costs - **580–619:** Below average — FHA and VA territory - **Below 580:** Poor — limited to FHA with 10% down or non-QM loans Most conventional lenders draw the line at 620. If your score falls below that, you aren't locked out — you just need to explore government-backed or alternative loan programs. Understanding [how mortgage rates work](/articles/how-mortgage-rates-work) can also help you see why credit score matters so much for your monthly payment. ## Loan Programs That Accept Lower Credit Scores One of the biggest gaps in online advice about bad credit mortgage loans is the failure to compare all your options side by side. Here's a quick-reference table covering the major programs: | Loan Program | Minimum Credit Score | Minimum Down Payment | Mortgage Insurance | Key Eligibility | | --- | --- | --- | --- | --- | | FHA | 580 (or 500 with 10% down) | 3.5% at 580+ | Yes — upfront + annual MIP | Open to all qualified borrowers | | VA | No government minimum (\[lenders typically set 580–620\](https://www.va.gov/housing-assistance/home-loans/)) | 0% | No PMI; VA funding fee applies | Veterans, active-duty, eligible spouses | | USDA | 640 (lender standard) | 0% | Yes — upfront + annual guarantee fee | Rural/suburban areas; income limits | | Conventional | 620 (Fannie/Freddie minimum) | 3–5% | PMI required below 20% down | Broadly available | | Non-QM | Varies — some accept 500+ | 10–20% typical | Varies by lender | Self-employed, unusual income, recent credit events | Each program carries trade-offs in cost, eligibility, and availability. For a broader look at how these fit together, see our guide to [types of mortgage loans](/articles/types-of-mortgage-loans). ## FHA Loans: The Most Common Bad-Credit Path For most buyers looking for a mortgage with bad credit, an FHA loan is the starting point. Backed by the Federal Housing Administration, these loans are designed to expand homeownership access for borrowers who might not qualify elsewhere. **Key details:** - Credit score of 580 or above qualifies you for the minimum 3.5% down payment. - Credit scores between 500 and 579 require at least 10% down. - FHA loans require [mortgage insurance (MIP)](https://www.consumerfinance.gov/ask-cfpb/what-is-private-mortgage-insurance-en-122/), which includes an upfront premium of 1.75% of the loan amount plus an annual premium typically ranging from 0.45% to 1.05% of the outstanding balance. Learn more about [mortgage insurance (PMI)](/articles/what-is-mortgage-insurance-pmi) and how it differs between loan types. - FHA loans are available through approved lenders, not directly from the government. MIP does add to your monthly cost, but for many buyers with lower credit scores, it's the trade-off that makes homeownership possible. If your score is at or near 580, the FHA path is often the most straightforward route. ## VA Loans for Eligible Veterans with Bad Credit If you're a veteran, active-duty service member, or eligible surviving spouse, [VA home loans](https://www.va.gov/housing-assistance/home-loans/) offer one of the strongest options for buying a home with lower credit. - **No government-set minimum credit score.** The VA doesn't impose a floor, though most lenders require between 580 and 620. - **No down payment required.** VA loans offer 100% financing. - **No private mortgage insurance.** Instead, borrowers pay a one-time VA funding fee, which ranges from 1.25% to 3.3% depending on service history and down payment amount. - **Competitive interest rates.** VA loans consistently carry some of the lowest rates on the market because of the government guarantee. The biggest advantage of a VA loan for bad-credit buyers is the combination of $0 down and no PMI. If you have VA eligibility, explore this option before any other. Many [first-time buyer programs](/articles/first-time-home-buyer-mortgage) can also be combined with VA benefits. ## USDA Loans for Rural Areas with Bad Credit The USDA Single Family Housing Guaranteed Loan Program provides zero-down-payment financing for buyers in eligible rural and suburban areas. - **Credit score of 640** is the standard for automated underwriting approval, though manual underwriting may be available for lower scores. - **No down payment required.** - **Income limits apply** — your household income generally can't exceed 115% of the area median income. - **Geographic restrictions** — the property must be in a USDA-eligible location. USDA loans work well for buyers with moderate credit who are looking outside of major metro areas. If your score is below 640, ask lenders about manual underwriting options (covered below). ## Conventional Loans with Lower Credit (620–639) Conventional loans backed by Fannie Mae and Freddie Mac technically require a minimum credit score of 620. If your score falls in the 620–639 range, you can qualify — but expect higher costs: - **Higher PMI premiums.** Private mortgage insurance rates for borrowers with credit scores in the low 600s can be significantly more expensive than for borrowers above 740. - **Loan-level price adjustments (LLPAs).** Fannie Mae and Freddie Mac impose additional fees based on credit score and down payment percentage, which get baked into your rate or closing costs. - **Stricter debt-to-income requirements.** Some lenders cap DTI ratios more tightly for lower-score borrowers. For buyers sitting near 620, it's worth comparing the total cost of a conventional loan (with its steeper PMI and LLPAs) against an FHA loan. In many cases, FHA ends up being more affordable until your score reaches the mid-to-upper 600s. ## Non-QM and Subprime Mortgage Loans [Non-qualified mortgage (non-QM) loans](https://www.consumerfinance.gov/ask-cfpb/what-is-a-qualified-mortgage-en-1789/) exist outside the standard lending rules set by the CFPB. They serve borrowers who don't fit the conventional mold — including those with credit scores below 580. - **Credit scores as low as 500** may be accepted by some non-QM lenders. - **Larger down payments required** — typically 10% to 20% or more. - **Higher interest rates** — expect rates 1–3 percentage points above conventional rates. - **Alternative income documentation** — bank statements or asset-based qualification instead of standard W-2 verification. Non-QM loans can make sense for self-employed borrowers, those with recent credit events (foreclosure, bankruptcy, short sale), or buyers with substantial assets but lower scores. However, the higher rates and fees mean these loans cost significantly more over time. Be cautious, review all terms carefully, and consider whether improving your credit first might save you money. ## Manual Underwriting: When Auto-Approval Fails If your mortgage application is denied by an automated underwriting system, manual underwriting may provide a path forward. With manual underwriting, a human loan officer reviews your full financial picture rather than relying solely on algorithms and credit scores. **Compensating factors that can help:** - **Larger down payment** — putting down 10% or more shows financial commitment. - **Cash reserves** — having several months of mortgage payments saved demonstrates stability. - **Low debt-to-income ratio** — keeping your total monthly debts well below 43% of gross income strengthens your case. - **Consistent payment history** — 12 or more months of on-time rent payments or utility bills can substitute for a strong credit score. FHA and VA loans both allow manual underwriting. USDA loans may also be manually underwritten in some cases. If you've been turned down through automated systems, ask your lender directly about this option. For a step-by-step look at the process, read our guide on [how to get a mortgage](/articles/how-to-get-a-mortgage). ## How to Improve Your Credit Score Before Applying If your timeline allows, spending a few months improving your credit before applying for a mortgage with bad credit can save you thousands over the life of the loan. Here are the highest-impact moves: - **Pay down revolving balances.** Credit utilization — the percentage of available credit you're using — is one of the biggest factors in your score. Aim to get below 30%, and ideally below 10%. - **Dispute errors on your credit report.** The [CFPB estimates that one in five consumers has an error](https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/) on at least one credit report. Correcting mistakes can produce an immediate score increase. - **Get your free credit reports.** You're entitled to [free weekly credit reports from all three bureaus](https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-free-copy-of-my-credit-reports-en-5/) through AnnualCreditReport.com. - **Make every payment on time.** Payment history is the single most influential factor in your FICO score. - **Avoid opening new credit accounts.** Each application triggers a [hard inquiry](https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-inquiry-en-1317/) that can temporarily lower your score. - **Keep old accounts open.** Length of credit history contributes positively to your score. Even a 20- to 40-point improvement can move you from one pricing tier to the next, potentially qualifying you for a lower rate or a smaller down payment requirement. ## What Bad Credit Costs You in Mortgage Payments The financial impact of a lower credit score is real and measurable. Lenders charge higher interest rates to offset the risk of lending to lower-score borrowers. You can [explore how rates vary by credit score](https://www.consumerfinance.gov/owning-a-home/explore-rates/) using the CFPB's rate comparison tool. Here's an example of how credit score affects cost on a $300,000, 30-year fixed-rate mortgage (rates are illustrative based on typical market spreads): | Credit Score Range | Estimated Rate | Monthly Payment (P&I) | Total Interest Paid | | --- | --- | --- | --- | | 740+ | 6.50% | $1,896 | $382,556 | | 680–739 | 6.85% | $1,968 | $408,423 | | 620–679 | 7.35% | $2,071 | $445,475 | | 580–619 (FHA) | 7.75% | $2,152 | $474,799 | The difference between a 740+ score and a 580–619 score in this example is roughly **$256 per month** — or more than **$92,000 in extra interest** over 30 years. Current rates fluctuate with market conditions; check the [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) for the latest averages. These numbers illustrate why credit improvement is worth the effort even if it delays your purchase by a few months. Understanding [how much mortgage you can afford](/articles/how-much-mortgage-can-i-afford) at different rate levels can help you make the right timing decision. ## Use the Mortgage Calculator to See Your Numbers Ready to see what your payment could look like? Use the [Opendoor mortgage calculator](https://www.opendoor.com/mortgage-calculator) to plug in your purchase price, down payment, and estimated rate. It's a quick way to compare scenarios at different credit score tiers and figure out the right price range for your budget. **Frequently asked questions** ## Disclosure Opendoor Home Loans LLC is not available in all markets. Products, programs, rates, and terms are subject to change without notice. This material is provided for informational purposes only and is not an offer or guarantee of credit. Contact Opendoor Home Loans for current availability. --- *Originally published at [https://www.opendoor.com/articles/mortgage-with-bad-credit](https://www.opendoor.com/articles/mortgage-with-bad-credit)*