A low credit score can make buying a home feel out of reach. Many renters assume that if their score is below 620, or even below 580, mortgage lenders will simply turn them away. In 2026, that assumption is out of date.
Government-backed loans have long accepted borrowers with damaged credit, and since November 2025 the rules for conventional mortgages have changed too. Fannie Mae and Freddie Mac no longer apply a hard 620 minimum credit score, which means more people with imperfect credit can now be considered for the most common type of home loan in America.
This guide explains exactly how to buy a home in the USA with a low credit score: which loan programs to target, what lenders look at besides your score, how to strengthen your application, and the mistakes to avoid.
What Counts as a “Low” Credit Score for a Mortgage?
Most US mortgage lenders use FICO scores, which range from 300 to 850. Broadly speaking:
| FICO Score Range | Rating | What It Means for a Mortgage |
|---|---|---|
| 740–850 | Very good to excellent | Best rates and widest choice of loans |
| 670–739 | Good | Easy approval for most loan types |
| 620–669 | Fair | Approval likely, but higher rates and costs |
| 580–619 | Poor | FHA and some VA loans are realistic options |
| 500–579 | Very poor | FHA possible with 10% down; limited lenders |
| Below 500 | Very poor | Very difficult; focus on credit repair first |
When a lender pulls your credit, they usually get scores from all three bureaus (Equifax, Experian and TransUnion) and use the middle score. If you are buying with a spouse or partner, the way joint scores are combined depends on the loan program, so it is worth asking your lender how they will calculate your “qualifying score.”
The Big 2026 Change: No More Hard 620 Floor for Conventional Loans
For decades, 620 was the magic number. If your middle score was below it, you generally could not get a conventional loan backed by Fannie Mae or Freddie Mac.
That changed on November 16, 2025, when Fannie Mae removed the 620 minimum from its Desktop Underwriter (DU) system, bringing it in line with Freddie Mac’s Loan Product Advisor. Instead of a fixed cutoff, the automated system now weighs your whole financial profile, including payment history, income, savings, debts and credit trends over time. For loans with more than one borrower, Fannie Mae now averages the borrowers’ middle scores rather than simply using the lowest one, which can help couples where one partner has weaker credit.
What this means in practice:
- It is not a guarantee. A lower score still raises your risk profile, and the automated system can still decline you.
- Individual lenders can set their own limits. Many lenders keep internal minimums (called “overlays”) above the agency rules. If one lender says no, another may say yes.
- Strong compensating factors matter more than ever. A large down payment, low debts, stable income and cash reserves can now push a sub-620 application over the line.
If you were turned down for a conventional loan in the past purely because of your score, it may be worth applying again.
Best Home Loan Options for Low Credit Borrowers
1. FHA Loans (Best Overall for Low Credit)
Loans insured by the Federal Housing Administration remain the most popular choice for buyers with poor credit.
- Credit score 580 or higher: minimum down payment of 3.5%
- Credit score 500–579: minimum down payment of 10%
- Debt-to-income ratio: often more flexible than conventional loans
- Past problems: FHA can approve borrowers after bankruptcy or foreclosure once a waiting period has passed (typically around two years after a Chapter 7 bankruptcy discharge and three years after a foreclosure, with some exceptions)
The trade-off: FHA loans require mortgage insurance premiums (MIP), paid both upfront (usually rolled into the loan) and annually as part of your monthly payment. With less than 10% down, the annual premium generally lasts for the life of the loan unless you refinance later.
Keep in mind that 500 and 580 are the FHA’s official minimums. Many lenders set their own floor at 580, 600 or higher, so shop around if you are near the bottom of the range.
2. VA Loans (For Veterans and Service Members)
If you are an eligible veteran, active-duty service member, or qualifying surviving spouse, a VA loan is one of the best deals in American lending.
- No down payment required in most cases
- No monthly mortgage insurance
- No official VA minimum credit score — the VA leaves this to lenders, many of whom accept scores in the 580–620 range
- Competitive interest rates even for fair credit
VA lenders also look closely at “residual income,” the money left over each month after major expenses, which can help borrowers whose scores do not reflect their real ability to pay.
3. USDA Loans (For Rural and Suburban Areas)
USDA loans, backed by the US Department of Agriculture, offer zero down payment for homes in eligible rural and many suburban areas. There are also household income limits.
USDA does not set a strict legal minimum score, but its automated system generally offers streamlined approval at around 640 and above. Borrowers below that can still be considered through manual underwriting, which involves more documentation and a closer look at your payment history.
4. Conventional Loans (Now More Accessible)
As explained above, conventional loans are no longer automatically off the table below 620. Benefits include:
- Down payments as low as 3% on some programs
- Private mortgage insurance (PMI) that can be removed once you reach 20% equity
- Loan limits of up to $832,750 for a single-family home in most US counties in 2026 (higher in expensive areas)
The catch is that pricing for conventional loans is heavily tied to credit score, so a borrower with a low score may face noticeably higher rates and PMI costs than with FHA. Ask your lender to quote both side by side.
5. Non-QM Loans (Last Resort for Unusual Situations)
Non-qualified mortgages are offered by private lenders outside the standard government and agency rules. They may suit self-employed borrowers, people with very recent credit events, or those who cannot document income in the usual way.
Expect higher interest rates and larger down payments (often 10–20% or more). Treat these as a short-term bridge and plan to refinance into a standard loan once your credit improves.
What Lenders Look At Besides Your Credit Score
Your score is only one piece of the puzzle. When it is low, the other parts of your application need to be strong.
Debt-to-income ratio (DTI). This is your total monthly debt payments, including the new mortgage, divided by your gross monthly income. Lower is better. Many programs prefer DTI under roughly 43%, though FHA and automated systems may allow more with strong compensating factors.
Stable income and employment. Lenders typically want a two-year history of steady work, ideally in the same field. Pay stubs, W-2s and tax returns are standard requirements.
Down payment size. Putting more money down reduces the lender’s risk and can offset a weak score.
Cash reserves. Savings left over after closing, often measured in months of mortgage payments, signal that you can handle emergencies.
Recent payment history. A borrower with a 590 score and 12 months of perfect on-time payments looks very different from one with a 590 score and a missed payment last month. Lenders pay close attention to the most recent 12–24 months.
Nontraditional credit. If you have a thin credit file, some lenders will consider records of rent, utility, phone and insurance payments.
Step-by-Step: How To Buy a Home With a Low Credit Score
Step 1: Pull Your Credit Reports and Fix Errors
You can get free credit reports from all three bureaus at AnnualCreditReport.com. Review every account carefully. Look for:
- Accounts that are not yours
- Late payments that were actually on time
- Debts listed twice
- Old negative items that should have dropped off (most negative information falls off after seven years)
Dispute errors directly with the credit bureau. Correcting even one mistake can raise your score meaningfully.
Step 2: Make Quick Credit Improvements
Some changes can lift your score within one or two billing cycles:
- Pay down credit card balances. Credit utilization (how much of your available credit you use) is a major factor. Getting each card below 30%, and ideally below 10%, can produce fast gains.
- Never miss a payment from now on. Set up autopay for at least the minimum on every account.
- Avoid opening new credit. New applications create hard inquiries and lower the average age of your accounts.
- Do not close old cards. Closing accounts can raise your utilization and shorten your credit history.
- Ask about a “rapid rescore.” If you pay down debt during the mortgage process, a lender can sometimes request an expedited update from the bureaus, which can take days instead of weeks.
Step 3: Save for a Larger Down Payment
With a score between 500 and 579, FHA requires at least 10% down. Even with a higher score, extra savings strengthen your file. Also budget for closing costs, typically around 2–5% of the purchase price.
Look into down payment assistance (DPA) programs run by state housing finance agencies, cities and counties. Many offer grants or forgivable second loans to first-time buyers, and some accept FHA-level credit scores. Gift money from family is also generally allowed if properly documented with a gift letter.
Step 4: Lower Your Debt-to-Income Ratio
Pay off small balances, avoid financing a car before you buy, and if possible increase your documented income. A lower DTI can compensate for a weaker score.
Step 5: Shop Multiple Lenders
This is one of the most important steps for low-credit borrowers. Lenders’ internal requirements vary enormously. Compare:
- Large banks — often stricter overlays
- Mortgage brokers — can shop your file to many lenders at once
- Credit unions — sometimes more flexible with members
- FHA-focused lenders — experienced with lower scores
Multiple mortgage credit inquiries made within a short window (generally 14 to 45 days, depending on the scoring model) are usually counted as a single inquiry, so rate shopping will not seriously hurt your score.
Step 6: Get Pre-Approved
A pre-approval letter shows sellers and agents that a lender has reviewed your credit, income and assets. With lower credit, it also tells you exactly what you can afford before you fall in love with a house.
Step 7: Complete Homebuyer Education
Many first-time buyer programs and some loan products require a homebuyer education course, often available online through HUD-approved housing counseling agencies at low or no cost. Even when optional, a HUD-approved counselor can review your credit and help you build a plan.
Step 8: Choose a Home Within Your Budget
Being approved for a certain amount does not mean you should spend it all. Leave room for property taxes, insurance, maintenance and emergencies. Missing a mortgage payment would set your credit back further.
How Much Does a Low Credit Score Really Cost?
A lower score usually means a higher interest rate, and over 30 years that adds up. As a rough illustration, on a $300,000 30-year fixed loan, the difference between a 6% rate and a 7% rate is roughly $200 per month, or more than $70,000 over the full term.
That is why many buyers use a two-stage plan: buy now with an FHA or other flexible loan, keep making on-time payments, and refinance into a lower rate or a conventional loan once their score improves. Refinancing can also remove FHA mortgage insurance if you have built enough equity.
Common Mistakes To Avoid
- Assuming you cannot qualify. Many buyers never apply. Talk to at least two or three lenders first.
- Using “credit repair” companies that promise miracles. No company can legally remove accurate negative information. You can dispute errors yourself for free.
- Making big purchases during the loan process. A new car loan or furniture on credit can change your DTI and derail approval right before closing.
- Moving money around without records. Lenders need to see where your down payment came from. Large unexplained deposits cause delays.
- Ignoring rent-to-own and land contract risks. These arrangements can work but often carry serious legal and financial risks. Have any contract reviewed by a real estate attorney.
- Taking the first offer. Rates and fees for low-credit borrowers vary widely between lenders.
Frequently Asked Questions
Can I buy a house with a 500 credit score? It is possible with an FHA loan and at least 10% down, but few lenders work at this level. You will have more options and better pricing if you can raise your score to 580 or higher.
What is the easiest mortgage to get with bad credit? For most people, an FHA loan. For eligible veterans and service members, a VA loan is often easier and cheaper.
Is 620 still the minimum for a conventional loan? Not as a hard agency rule. Since November 2025, Fannie Mae and Freddie Mac rely on automated underwriting of your full profile instead of a fixed 620 floor. However, individual lenders may still require 620 or more.
How long after bankruptcy can I buy a home? It depends on the loan type and bankruptcy chapter. FHA typically allows approval about two years after a Chapter 7 discharge; conventional loans usually require a longer wait. Rebuilding credit during that period is essential.
How fast can I raise my credit score? Paying down credit card balances and correcting errors can show results within 30–60 days. Recovering from late payments or collections takes longer, but steady on-time payments improve your score month by month.
Final Thoughts
Buying a home in the USA with a low credit score is harder than with excellent credit, but it is far from impossible, and in 2026 the door is wider than it has been in years. FHA loans still accept scores as low as 500, VA and USDA loans offer zero-down options, and conventional loans no longer shut out every borrower below 620.
The winning formula is simple: check and clean up your credit report, pay down revolving debt, save as much as you can, compare several lenders, and buy a home you can comfortably afford. Then keep paying on time and refinance when your score improves. Your credit score today does not have to decide whether you ever own a home.