Can You Get a Home Loan with Bad Credit?
Buying a home is a huge milestone—but if you have bad credit, it can feel completely out of reach. The good news? You’re definitely not alone, and you can get a home loan with bad credit. It just takes a little more planning, some creative options, and knowing where to look.
In this guide, we’ll break down what “bad credit” means in the world of home buying, what types of loans are available, how lenders really make decisions, and the smartest routes for first-time buyers who are working with low scores.
Can You Get a Home Loan with Bad Credit?
Understanding “Bad Credit” in the Home Loan Process
Let’s start with the basics: what is considered “bad credit”?
In most cases, a credit score below 620 is viewed as risky by mortgage lenders. Anything under 580 is considered poor. That doesn’t mean you’re automatically denied—it just means you’ll have to work harder to prove you’re worth the risk.
Lenders don’t just look at your credit score. They also consider your:
Income and job stability
Debt-to-income ratio (how much debt you carry vs. how much you earn)
Down payment size
Payment history on rent or other bills
So yes, you can get a home loan with bad credit, especially if you have strengths in these other areas.
Types of Home Loans You Can Get with Bad Credit
FHA Home Loans for Bad Credit Borrowers
If you’re asking, “Can you get a FHA home loan with bad credit?”—the answer is yes.
FHA loans are government-backed mortgages that are specifically designed to help people with lower credit scores. You can qualify with a score as low as 580 and just 3.5% down. Even scores between 500–579 might be approved if you can put 10% down.
These loans are easier to get approved for because the government insures the loan, which lowers the lender’s risk.
VA and USDA Loans – No Down Payment Required
If you're a veteran or buying a home in a qualifying rural area, VA and USDA loans might be an option.
VA loans (for military service members and veterans) require no down payment and have no minimum credit score, though most lenders prefer 580+.
USDA loans also require no down payment and are available to buyers in certain rural and suburban areas.
These programs are extremely bad-credit-friendly, but they’re only available to eligible borrowers.
Home Equity Loans with Bad Credit
Wondering, “Can you get a home equity loan with bad credit?” If you already own a home and have built up equity, the answer might be yes.
Home equity loans let you borrow against the value of your home—but lenders will charge higher interest rates if your credit score is low. Be cautious: this type of loan uses your home as collateral, so missed payments could lead to foreclosure.
Construction & Home Improvement Loans
Thinking of building or renovating? Can you get a home construction loan with bad credit or a home improvement loan with bad credit? These are definitely harder to qualify for with poor credit.
That said, if you have:
A strong, consistent income
A co-signer with good credit
Or a large down payment
...you may still be approved. Lenders for these types of loans are often more conservative, but some government programs offer assistance if your project qualifies.
What Lenders Look at Beyond Just Your Credit Score
Can You Get a Home Loan with a Bad Credit Rating or History?
Yes—but it depends on how bad your credit history actually is. If your low score comes from one-time issues like a medical bill or temporary job loss, you’re in a better position than someone with recent defaults or active collections.
If you have a consistent job, pay your rent and bills on time, and can show financial stability, you still have options.
How to Get a Mortgage with Bad Credit, But Good Income
Strong income can make up for a lot. If you’re asking how to get a mortgage with bad credit but good income, focus on proving that your income is steady, reliable, and more than enough to cover the monthly mortgage.
Lenders love borrowers who:
Have been in the same job for 2+ years
Earn more than their debt obligations
Can verify income with tax returns or pay stubs
Your high income reduces the lender’s risk, even with a lower score.
Mortgage with Bad Credit but Large Deposit
A larger down payment = less risk for the lender. If you can put down 15–20% (instead of the typical 3.5–5%), you may still qualify for a conventional mortgage.
A bigger deposit:
Increases your equity from day one
Reduces how much you need to borrow
Shows lenders that you’re financially committed
If you’ve been saving aggressively or have help from a family member, this strategy can open more doors.
Smart Options for First-Time Home Buyers with Bad Credit
First-Time Home Buyer Loans with Bad Credit and Zero Down
There are a few legit first-time home buyer loans with bad credit and zero down, including:
FHA (3.5% down with 580+ credit score)
VA (0% down for veterans)
USDA (0% down for eligible rural buyers)
Each has specific requirements, so check your eligibility and compare interest rates before deciding.
How to Buy a House with Bad Credit as a First-Time Buyer
Here’s a simplified path for how to do it:
Check your credit report – Fix any errors and pay off small balances if possible.
Get prequalified – Shop around with bad-credit-friendly lenders.
Compare mortgage options – FHA is often best, but explore local programs.
Apply and stay patient – Be ready with documentation and a solid explanation of your credit situation.
How Can I Buy a House with Bad Credit and No Down Payment?
Look into local housing assistance programs. Many states and cities offer grants or loans to help first-time buyers cover their down payment.
You can also try:
Asking family for a gift
Using seller concessions
Applying for a VA or USDA loan if eligible
Fastest Way to Buy a House with Bad Credit
Build Credit While House Hunting
One of the fastest ways to buy a house with bad credit is to improve your score while you shop. It doesn’t take much.
Here’s how:
Get a secured credit card to build credit
Pay down credit cards to reduce utilization
Don’t open new lines of credit unless absolutely necessary
Avoid big purchases that change your debt-to-income ratio
Even a 20–40 point jump could qualify you for better loan terms.
Work with a Bad Credit-Friendly Mortgage Broker
Some brokers specialize in helping borrowers with bad credit. They already know which lenders are open to flexible credit requirements and can help you package your application the right way.
This saves you time, increases your chances of approval, and helps avoid wasted credit inquiries.
Yes, You Can Buy a Home with Bad Credit
So, can you get a home loan with bad credit? You can—and plenty of people do. It just means you’ll need to be strategic, patient, and willing to explore every option.
Want to start improving your credit score today? Step’s credit building app and secured credit card to build credit can help you boost your score while you prepare to buy your home.
Check out our guide to understanding credit scores and start building your path to homeownership—credit score and all.
