How to Buy a House with a Low Credit Score

Buying a home with a low credit score is challenging but absolutely possible in 2026. Whether you're working with a score below 580 or rebuilding after financial difficulties, there are government-backed loan programs and strategies designed specifically to help borrowers like you qualify for a mortgage. The key is understanding which loan options match your credit profile and taking steps to strengthen your application.

Understanding Credit Score Requirements for Mortgages

Credit score requirements vary significantly depending on the type of loan you're pursuing. The minimum credit score needed to buy a house generally starts at 500 for an FHA loan with a 10% down payment, while most conventional loans require at least a 620 score.^[1] However, major changes are reshaping the mortgage landscape in 2026.

Beginning November 16, 2025, Fannie Mae removed the minimum credit score requirement from conventional loans through its Desktop Underwriter system.^[3] This represents a historic shift—for years, the minimum FICO score to get a conventional loan for most borrowers has been 620.^[7] Now, lenders evaluate borrowers using a combination of factors beyond just credit scores, which could open doors for qualified applicants with lower scores.

Every lender evaluates credit scores differently, and there is no universal minimum credit score required to buy a house.^[5] This means your options depend on which lender you work with and which loan program you choose. Your credit score is represented by a number between 300 and 850, with higher scores generally improving your chances of approval and securing better interest rates.^[5]

Loan Programs for Borrowers with Low Credit Scores

FHA Loans (Federal Housing Administration)

FHA loans are the most accessible option for borrowers with low credit scores.^[1] These government-backed loans are attractive to first-time home buyers and others because they offer looser qualifying requirements and a 3.5% minimum down payment.^[2]

Here's how FHA credit requirements work:

• Credit score of 580 or higher: You can qualify with just a 3.5% down payment^[1]
• Credit score between 500-579: You'll need a 10% down payment^[1]
• Few lenders offer loans for borrowers with scores below 580 — most lenders, including Rocket Mortgage, set their own minimum at 580^[2]

Important considerations with FHA loans: If you make a down payment of less than 10%, you'll pay lifetime mortgage insurance premiums, which increases your monthly costs.^[2] Additionally, FHA loans can only be used to purchase a primary residence, not investment properties.^[2]

FHA loans also have debt-to-income (DTI) ratio requirements. If your credit score is between 580–619, your housing expense ratio—the percentage of your income going toward your mortgage payment—should be no higher than 38%, with a total DTI ratio not exceeding 45%.^[2] If your score is 620 or higher, you may qualify with a higher DTI ratio in many cases, although never higher than 57%.^[2]

VA Loans (Veterans Affairs)

If you're a veteran, active-duty military member, or eligible spouse, VA loans offer significant advantages. VA loans technically have no minimum credit score requirement^[2], and they usually don't require a down payment.^[1] However, every VA lender sets its own minimum credit score requirements, so you'll still need to shop around.^[5]

The main requirement is proving your military service through a Certificate of Eligibility. While credit score minimums vary by lender, VA loans are generally more flexible than conventional loans for borrowers with credit challenges.

USDA Loans (United States Department of Agriculture)

USDA loans are available for homebuyers looking to purchase property in rural areas. This financing option does not require a certain credit score to qualify, but most lenders who write USDA loans look for a credit score of 640 or higher.^[4] However, if your score is lower (around 580 or higher), obtaining a USDA loan is still possible, as some lenders will look at other financial and income variables.^[4]

Like VA loans, USDA loans typically don't require a down payment, making them attractive for borrowers with limited savings.

Conventional Loans (Recent Changes)

The mortgage industry is changing rapidly. Effective November 16, 2025, both Fannie Mae and Freddie Mac are removing the minimum credit score requirement from their conventional loans.^[2] This doesn't mean you can get approved with any credit score, but it does mean lenders now evaluate risk using multiple factors beyond just your FICO number.

Traditionally, conventional loans required a minimum credit score of around 620.^[1] With these new rules, borrowers with lower scores may find lenders willing to work with them if other aspects of their financial profile are strong—such as a solid income, low debt levels, or a substantial down payment.

Strategies to Strengthen Your Mortgage Application

Improve Your Credit Score Before Applying

While you can apply for loans with a low credit score, taking time to improve your score before applying can significantly benefit you. Focus on:

• Paying all bills on time for at least several months
• Paying down existing debt to lower your debt-to-income ratio
• Checking your credit report for errors and disputing inaccuracies with the three major credit bureaus: Equifax, Experian, and Transunion^[5]
• Avoiding opening new credit accounts or making large purchases before applying

Increase Your Down Payment

A larger down payment demonstrates financial commitment and reduces lender risk. With FHA loans, you can reduce your credit score requirement from 580 to 500 by putting down 10% instead of 3.5%.^[1] For conventional loans, a substantial down payment may compensate for a lower credit score under the new underwriting guidelines.

Lower Your Debt-to-Income Ratio

Your DTI ratio—the percentage of your gross monthly income that goes toward debt payments—is crucial. Lenders want to see this number as low as possible. Pay down credit cards, car loans, and other debts before applying for a mortgage. This improves your chances of approval and may help you qualify for better interest rates.

Get Preapproved Before House Hunting

Getting preapproved shows sellers you're a serious buyer and helps you understand exactly how much you can borrow. This is especially important when you have a low credit score—preapproval demonstrates that a lender has evaluated your financial situation and determined you're qualified.^[8]

Consider a Co-Borrower

If you have a spouse, family member, or trusted friend with a stronger credit profile willing to co-sign, this can strengthen your application. However, they'll be equally responsible for the loan if you default.

What Affects Your Mortgage Rate with Low Credit

Your credit score directly impacts the interest rate you'll receive. Borrowers with lower credit scores typically pay higher interest rates than those with excellent credit. Over the life of a 30-year mortgage, even a 1% difference in interest rate can mean tens of thousands of dollars in additional payments.

The good news: Changes in scoring systems mean that lower scores don't automatically disqualify someone from getting a mortgage.^[4] Expanded FICO scoring now factors in buy-now-pay-later (BNPL) payments, and VantageScore 4.0 includes rent, utility, and telecom payments, giving a fuller picture of financial responsibility.^[4]

FAQ: Buying a House with Low Credit

Can I buy a house with a 500 credit score?

Yes, you can obtain an FHA loan with a credit score as low as 500 if you make a 10% down payment.^[2] However, few lenders offer loans for borrowers with scores this low—most set their minimum at 580.^[2] You'll need to shop around and be prepared for higher interest rates.

What's the difference between FHA and conventional loans for low credit?

FHA loans are government-backed and have much more flexible credit requirements (as low as 500 with 10% down). Conventional loans traditionally required 620, though new rules effective November 2025 no longer mandate a minimum score.^[2][3] FHA loans require mortgage insurance if you put down less than 10%, while conventional loans require private mortgage insurance (PMI) for down payments below 20%.

How long does it take to improve my credit score enough to qualify?

Improving your credit score takes time, but you can see meaningful progress in 3-6 months by paying all bills on time and paying down debt. However, don't delay buying if you find an affordable home and qualify now—waiting may not be worth the cost of renting longer.

Will I pay more in interest with a low credit score?

Yes, borrowers with lower credit scores typically receive higher interest rates. Over a 30-year mortgage, this can add significantly to your total cost. However, you can refinance later if you improve your credit score and rates drop.

Do I need a down payment for VA or USDA loans?

No, both VA and USDA loans typically don't require a down payment, making them excellent options if you qualify.^[1] This is a major advantage if you have limited savings for a down payment.

What should I do first if I want to buy a house with low credit?

Start by checking your credit report for errors and reviewing your credit score.^[8] Then, determine your budget and get preapproved with a lender who specializes in low-credit mortgages. Finally, decide which loan program works best for your situation—FHA, VA, USDA, or conventional.

Your Next Steps

Buying a house with a low credit score requires patience and strategic planning, but it's absolutely achievable. Here's what to do:

1. Check your credit report at AnnualCreditReport.com (free once per year) and dispute any errors
2. Determine which loan program fits your situation — FHA, VA, USDA, or conventional
3. Work on your credit score if you have time, focusing on paying bills on time and reducing debt
4. Get preapproved with a lender experienced in low-credit mortgages
5. Save for a down payment — even a few extra percentage points can improve your approval chances
6. Start house hunting with realistic expectations about price range and interest rates

The mortgage landscape is changing in your favor. With government-backed loan programs and evolving underwriting standards, lenders are increasingly willing to work with borrowers who have lower credit scores but solid financial fundamentals. Your low credit score doesn't have to prevent you from achieving homeownership.

Sources & References

1. How To Buy A House With Bad Credit | Loan Options 2026 — themortgagereports.com
2. How to buy a house with bad credit - Rocket Mortgage — rocketmortgage.com
3. Buying a Home Without a Credit Score? New Rules Make It Possible — luminate.bank
4. Will Your 2026 Credit Score Get You The Home Loan You Need? — homelight.com
5. What Credit Score Do Home Buyers Need to Buy a House in 2026? — leaderbank.com
6. How to Buy a Home with a Bad Credit Score in 2026 - AmeriSave — amerisave.com
7. Credit score rules for mortgages changing in 2026 may help first-time buyers — youtube.com
8. Buying a Home in 2026? Here's What to Do First — nchfa.com