How to buy a house with ‘bad’ credit: Loan options, requirements, and credit-building steps

Just because you've had a few setbacks with your credit doesn't mean homeownership is out of reach. If you're wondering how to buy a house with a bad credit history, you have options. Some programs let you qualify with a lower credit score, as well as other things you can do to burnish your qualifications with lenders.

We'll walk you through loan options, credit requirements, and actionable steps to strengthen your financial profile so you can move forward with confidence.

What do mortgage lenders consider a 'bad' credit score?

There's no such thing as "bad" credit. However, mortgage lenders will review your credit, and some loan types require a minimum credit score.

To get an idea of where your score may stand, here is how FICO^® categorizes credit scores.

Scores below 580 are typically considered subprime, which means lenders view them as higher risk.

That said, your credit score is just one part of your financial story. Lenders also evaluate your down payment, debt-to-income ratio (DTI), savings, and income stability when determining your eligibility.

What is the average credit score?

The average credit score in the United States is around 715 as of 2025, according to FICO^®.

If your score is below average, don't worry. Many loan programs are designed to work with borrowers whose scores fall below the national average, and you can take steps to improve your credit over time.

Can you buy a house with 'bad' credit?

Yes, you can buy a house with a lower credit score, but it may require stronger qualifications in other areas.

While there's no such thing as a "mortgage for bad credit," lenders usually consider your complete financial picture. If you can afford the monthly payment, you still can be approved even with a lower credit score.

A higher down payment can help offset a lower score by reducing the lender's risk. Similarly, a low DTI and sufficient cash reserves to cover several months of mortgage payments indicate financial stability. Lenders often will compensate for the risk of lending to someone with a lower score by charging a higher mortgage interest rate and higher mortgage insurance costs.

If you have no credit history, you might wonder if homeownership is possible. While you can buy a house with no credit, your mortgage application may require manual underwriting, a larger down payment, or a co-signer to be approved. You also may have a difficult time finding a lender.

Rocket Mortgage requires a median credit score of 580.¹

Home loans for buyers with 'bad' credit

What credit score do you need to buy a house? It depends on the loan type.

Several mortgage types are available to borrowers with lower or challenged credit. Each has its own minimum credit score and eligibility rules, so it's worth comparing your options to find the best fit for your situation.

Rocket Mortgage doesn't offer subprime loans. A credit score below 580 would classify the loan as subprime, resulting in higher interest rates for the borrower. Instead, Rocket Mortgage provides you with tools to strengthen your credit and help you qualify for a more favorable loan in the future.

FHA loans

Federal Housing Administration loans are designed for borrowers with lower credit scores and limited savings. The minimum credit score for an FHA loan depends on your down payment. Rocket Mortgage requires a credit score of at least 580 and a minimum down payment of 3.5%. Other lenders offer FHA loans with a credit score of 500 – 579 and a 10% down payment.

If your score is between 580 and 619, your housing expense ratio should be no higher than 38%, and your DTI should be less than 45%. Borrowers with scores of 620 or higher can qualify with a DTI of up to 57%.

FHA loans require borrowers to pay both an up-front and an annual mortgage insurance premium (MIP). The annual MIP is paid for 11 years if you put down at least 10%, and for the entire loan term if you put down less than 10%.

FHA loans can only be used to buy a primary residence.

VA loans

Veterans Affairs loans are available only to military personnel, veterans, and their surviving spouses. VA loans require no down payment and can be used to buy or refinance a primary residence.

While there is no minimum credit score for a VA loan, Rocket Mortgage requires a minimum credit score of 580.

There's a VA funding fee that most borrowers must pay at closing. The exceptions are if you receive VA disability, are a qualified surviving spouse, or have returned to active duty after receiving a Purple Heart.

Conventional loans

Conventional loans are the most common type of mortgage. Conforming conventional loans are not backed by the government but meet specific requirements that allow lenders to sell them to Fannie Mae or Freddie Mac. Conforming loans used to require a minimum credit score of 620, but Fannie and Freddie dropped that requirement in November 2025. Loan approval is now based on an evaluation of overall credit risk factors rather than a hard 620 cutoff.

Conforming conventional loans require a 3% down payment⁴ for fixed-rate loans and a 5% down payment for adjustable-rate mortgages (ARMs). Borrowers who put down less than 20% must pay for private mortgage insurance (PMI) until they have 20% home equity.

With a higher down payment, conventional loans can be used to buy vacation homes and investment properties.

USDA loans

If you plan to buy a home in a qualifying rural area, a USDA loan is an option. Rocket Mortgage currently doesn't offer USDA loans, but we're happy to explain all your mortgage options.

Backed by the U.S. Department of Agriculture, these loans have no down payment requirement. While the USDA itself does not set a minimum credit score, it can be more difficult to qualify with a credit score under 640.

In addition to the location requirement, you and every member of your household can't make more than 115% of the area median income.

Hard money loans

If you don't want to wait to get your finances in order, a hard money loan may be an option.

It'll vary by lender, but there typically are very few qualification requirements for a hard money loan. The lender is banking on the fact that they can take the property back if you default.

While your home is collateral for any mortgage, hard money loans often come with very high interest rates because the lender isn't qualifying you to the same level they would if you get a traditional mortgage. This can make it even more difficult to afford the mortgage in the long term.

Rocket Mortgage doesn't offer hard money loans.

Ways to improve your credit score and increase your chances of approval

If you need to improve your credit before you apply for a mortgage, there are some steps you can take to repair your credit.

1. Check for errors

There are three major credit bureaus: Equifax^®, Experian™, and TransUnion^®. Each has its own scoring formula. You can't challenge their scores, but you can review your credit report for errors and ask them to correct any mistakes.

AnnualCreditReport.com lets you access your credit report from each of the three major bureaus once a week for free. It doesn't show your credit score, but it does show you what's on your report.

The Rocket Money app updates your FICO^® Score 2 once a month for you to review, based on Experian™ data.

2. Pay your bills on time

Paying bills on time is the single biggest thing you can do to help your credit score because 35% of the formula is based on payment history. If nothing else, always make the minimum payment on every bill you have. Use autopay if it helps.

3. Increase your available credit

Increasing your available credit can boost your credit score by lowering your credit utilization ratio, which shows how much of your available credit you're using. You generally want to keep this at or below 30% of your overall limit.

You can pay down existing debt or request a limit increase from your credit card company. Amounts owed make up 30% of your score formula, including installment debt, though credit cards often change most frequently.

4. Pay collections and ask for deletion

If you have past collections on your credit report, it's considered an adverse event and can stay on your report for up to 7 years. If you pay these debts, they show up as "paid" on your credit report, and it's not as bad for your score. However, it would be best if the collection didn't show up at all.

If you pay off a debt that went to collections, ask your creditor if they'll delete the record in exchange for your payment. They won't always do so, but it can't hurt to ask.

5. Avoid hard credit inquiries

Applying for a bunch of new credit accounts in a short time span suggests you may be overextending yourself. Credit inquiries make up 10% of your credit score. When you apply for new credit, your credit score typically drops slightly with each inquiry. The good news is that shopping around for the best rate on something like a mortgage only counts as one inquiry. Credit inquiries for the same type of loan within 14 to 45 days of each other count as only one inquiry.

6. Find a co-signer

If you apply with a co-signer, the lender will consider their income, credit, and assets along with yours. The boost in income can reduce your DTI and help you borrow more when you're looking for a home.

Your co-signer needs to understand that they're responsible for repaying the loan if you can't make the payments, so you'll need someone willing to take on that responsibility.

FAQ

Now that we've covered the basics, let's address some questions that might be on your mind.

What's considered a 'bad' credit score?

Scores from 300 – 579 involve subprime lending. Any loans you could get with this credit score are likely to require a higher down payment and charge a higher interest rate. The specific criteria vary by lender and loan type, so it's worth exploring multiple options.

Can I get a mortgage loan with a credit score of 500?

Conventional, VA, and USDA loans technically have no minimum credit score requirement, so you might find a lender willing to qualify you for these loans. You can obtain an FHA loan with a credit score as low as 500 and a 10% down payment. However, many lenders, including Rocket Mortgage, typically won't offer you a loan if your credit score is below 580 because the rates and terms would be onerous for the client. You wind up with subprime rates. We would rather set you up for success by improving your credit score so you can qualify for more favorable terms.

Will I pay more for mortgage insurance with 'bad' credit?

FHA loans have standardized mortgage insurance fees regardless of your credit score. The same applies to the VA funding fee. However, credit is one factor that determines the cost of PMI in conventional loans.

Will getting a co-signer help me get approved for a mortgage?

Finding a co-signer could help you reduce your DTI and provide more assets for a down payment or reserves. Having stronger qualifications in these areas may mitigate a lower credit score in lenders' eyes.

The bottom line: Buying a house with lower credit is possible

A lower credit score doesn't have to stay that way. You can always strive for a score that will secure favorable mortgage terms. Start with good habits, such as regularly checking your report for errors and paying on time. Co-signers also can help. There are even options available for individuals with lower credit scores.

If you're feeling more confident and ready to get started, you can apply online. If you want to talk to someone about the next steps, you can also chat with one of our Home Loan Experts.

¹ To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.

² Rocket Mortgage is not acting on behalf of FHA or HUD

³ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. 

⁴ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

Rocket Mortgage and Rocket Money are trademarks of Rocket Mortgage, LLC or its affiliates.