5 Proven Ways to Get a Mortgage with Bad Credit in 2026

You can get a mortgage with bad credit through FHA loans, credit union programs, or subprime lenders. Most require a minimum credit score of 500–580, larger down payment, and proof of stable income. Working with a mortgage broker can help identify options matching your situation. (Related: How Rising Mortgage Rates Impact Home Affordability: Calculator Tools for Buyers) (Related: Closing Costs Calculator: What Buyers & Sellers Must Know) (Related: Today’s Fixed Mortgage Rates: A Complete Guide for 2024 and Beyond) (Related: How to Calculate Home Equity and Leverage It for Investment Decisions in a High Interest Rate Environment) (Related: The Complete Guide to Budget for Home Repairs in 2026) (Related: Earnest Money Deposit: The Complete 2026 Guide to Amounts and Rules)

Understanding Mortgages with Bad Credit

A “bad credit” score typically falls below 580 on the FICO scale. Lenders use this number to assess risk — the lower your score, the higher the perceived likelihood of default. That said, a low score doesn’t automatically disqualify you from homeownership. It simply changes the loan programs available to you and affects your interest rate and down payment requirements.

Lenders compensate for higher risk by charging elevated interest rates. On a $250,000 loan, even a 1.5% rate difference can add over $80,000 in interest across a 30-year term. Understanding this math upfront helps you decide whether to buy now or spend time rebuilding your credit before applying.

What is the minimum credit score needed to get a mortgage?

The minimum credit score depends on the loan type. Conventional loans typically require 620+. FHA loans insured through HUD allow scores as low as 500, though scores between 500–579 require a 10% down payment. Scores of 580 or higher qualify for FHA’s standard 3.5% down payment program. VA and USDA loans don’t set official minimums but most lenders impose overlays of 580–620.

Can I get a mortgage with a 500 credit score?

Yes — but your options are limited. FHA is the most accessible path at a 500 score, requiring a 10% down payment. Some portfolio lenders and credit unions also work with scores in this range, particularly if you can show two years of steady employment, low debt-to-income ratio, and minimal recent delinquencies. Expect higher rates and stricter documentation requirements.

Bad Credit Mortgage Options and Programs

Several structured programs exist specifically to help borrowers with poor credit history access financing. Here are the most practical options:

FHA Loans (Federal Housing Administration): The most popular bad credit mortgage option in the U.S. Backed by the federal government, FHA loans allow scores as low as 500 with flexible underwriting guidelines. You’ll pay an upfront mortgage insurance premium (1.75% of the loan) plus annual MIP. According to HUD’s homebuying loan resources, FHA is designed for first-time and credit-challenged buyers.

VA Loans: Available to eligible veterans and active-duty service members. No official minimum score exists at the government level, but lender overlays typically require 580+. VA loans require no down payment and no private mortgage insurance, making them one of the most powerful tools for qualifying borrowers despite credit challenges.

USDA Loans: For rural and suburban properties. Lender overlays generally require 580–640, but the program offers 100% financing. Income limits apply based on area median income.

Subprime Mortgages: These are non-qualified mortgage (non-QM) products offered by private lenders to borrowers who don’t meet standard guidelines. Subprime mortgages carry higher rates — sometimes 2–5% above conventional — and stricter terms. They can serve as a bridge while you improve your credit, but should be evaluated carefully against total cost over time.

Credit Union Programs: Many credit unions hold loans on their own books rather than selling them to secondary markets. This flexibility allows them to underwrite based on your full financial picture, not just your credit score. Membership requirements vary but are often easy to meet.

Strategies to Improve Your Approval Chances

Even if you apply today, these steps meaningfully improve your outcome — either by qualifying you for better programs or reducing your rate:

Reduce your credit utilization below 30%. Utilization — the ratio of balances to credit limits — is the second-biggest factor in your FICO score. Paying down revolving debt before applying can boost your score 20–50 points within 30–60 days.
Dispute inaccurate items on your credit report. Under federal law, you’re entitled to free annual credit reports. Errors — including accounts that aren’t yours or incorrect late payments — can be disputed and removed, sometimes raising scores significantly.
Build a larger down payment. A 10–20% down payment signals financial commitment to lenders and reduces their risk exposure, making approval more likely and rates more competitive.
Add a co-borrower with stronger credit. A creditworthy co-borrower’s score can be averaged into the application, which may unlock better programs — though they also share legal responsibility for the loan.
Document all income sources carefully. Self-employment, gig work, or irregular income must be thoroughly documented. Two years of tax returns, bank statements, and 1099s are standard requirements when credit is thin.

How to Calculate Affordability with Bad Credit

One of the most overlooked steps when applying for a bad credit mortgage is running the numbers before you talk to a lender. Because your rate will likely be higher than average, your monthly payment — and total loan cost — will be higher too.

Standard debt-to-income (DTI) guidelines cap housing costs at 31% of gross monthly income (front-end ratio) and total debt at 43% (back-end ratio) for FHA loans. With a higher interest rate, the same purchase price produces a higher monthly payment, which compresses how much home you can actually afford.

Use the mortgage calculator at RealEstateCalcPro.com to model different scenarios — plug in a higher interest rate reflecting your credit tier and adjust the purchase price until the monthly payment fits within your DTI target. This gives you a realistic budget range before you ever fill out an application.

Common Mistakes to Avoid When Applying

Opening new credit accounts before closing. New inquiries and new accounts lower your average account age and can drop your score at exactly the wrong moment.
Applying with only one lender. Rate shopping within a 14–45 day window is treated as a single inquiry by FICO scoring models. Getting 3–5 quotes costs nothing in score terms but can save thousands over the loan term.
Underestimating closing costs. Bad credit borrowers often face higher lender fees and origination charges. Budget 2–5% of the loan amount for closing costs on top of your down payment.
Ignoring improving credit score for mortgage approval before applying. Even a 3–6 month credit improvement plan can move you from a 570 to a 590 score — crossing the FHA threshold for a lower down payment requirement.

Frequently Asked Questions

How long does it take to improve my credit score enough to qualify for a better mortgage rate?

Most borrowers see meaningful improvement within 3–12 months by reducing utilization, disputing errors, and avoiding new debt. Moving from a 580 to 620 score can shift you from FHA territory into conventional loan eligibility, significantly reducing your mortgage insurance costs over time.

Are subprime mortgages a good idea for first-time buyers?

Subprime mortg

Recommended Resources:

Credit Score Monitoring & Improvement Software (Credit Karma) — Readers working to qualify for mortgages with bad credit need tools to monitor and improve their credit scores before applying. Credit Karma offers free credit monitoring, which is directly relevant to the post’s focus.
Mortgage Broker Directory & Comparison Tool — The post recommends working with mortgage brokers. Affiliate-eligible books and guides on mortgage brokers help readers understand the broker selection process and what to expect.
Financial Planning & Budget Management Software — Readers need to demonstrate stable income and manage finances for mortgage qualification. Budget and financial planning tools directly support the goal of strengthening mortgage applications with bad credit.