Follow These 10 Steps to (Still!) Get a Mortgage … Even With Bad Credit
If you’re thinking about buying a house, you probably know that having a good credit score gives you a leg up in the process. A healthy credit score can help you get approved for a loan and even result in a better mortgage interest rate.
If your credit score is low, you might think that getting a mortgage will be impossible. But, if you’re willing to put some work in, you can buy a house with bad credit.
We’ve talked to mortgage professionals who handle credit issues daily, investigated mortgage programs for buyers with bad credit, and broken the process into clear steps. Read on to find out how to get a mortgage with bad credit.
Can you really get a mortgage with bad credit?
The most commonly used credit score, also called a FICO score, ranges from 300 to 850. Here’s how the credit bureau Experian breaks down credit categories:
Score
Rating
% of people
300-579
Poor
16%
580-669
Fair
17%
670-739
Good
21%
740-799
Very good
25%
800-850
Excellent
21%
People with a very low score — under 500 — are unlikely to qualify for a mortgage. However, the Federal Housing Administration (FHA) has programs that accept buyers with scores as low as 500. In fiscal year 2023, the average credit score of FHA recipients was 670, according to a U.S. Department of Housing and Urban Development report.
Roughly 2% of FHA loans went to buyers with a FICO score between 500 and 599. Only 11.97% of FHA endorsements were given to credit scores below 620, while 14.95% were given to credit scores of 720 or higher. 82% of total FHA financing went to first-time homebuyers in 2023.
If your credit score is under 600 (or better yet, 620), you may need compensating factors, such as a larger down payment, to qualify for a mortgage, says Richie Helali, Senior Lender Relationship Manager at HomeLight.
According to a 2023 Borrower Insights Survey by ICE Mortgage Technology, 53% of renters reported that they would be more likely to purchase a home if there were programs to address their poor credit score.
With that in mind, here are the steps to take if you want to get a mortgage with bad credit.
