📅 Updated: July 2026 · Written by Tom · 13 min read

How to Get Approved for a Mortgage With Bad Credit: What Actually Works in 2026

A 580 credit score doesn't mean you can't buy a house. It means you'll pay more for the privilege — higher interest rate, bigger down payment, more paperwork — but homeownership isn't off the table. I bought my first house with a 615 credit score, and I learned more about mortgages in those 90 days than I cared to know. Here's what actually works when your credit is below the "ideal" 740+, and what's just lender marketing.

First, the honest framing: buying a house with bad credit costs you real money. On a $300,000 mortgage, the difference between a 620 borrower (about 6.9% rate in 2026) and a 740 borrower (about 6.1%) is roughly $170/month — about $61,000 over the 30-year loan. Sometimes the smart move is waiting 12 months to fix your credit first. But sometimes waiting costs you more than the rate penalty (rising home prices, rent going up, your lease situation). This guide covers both: how to get approved now, and how to decide whether you should.

The actual minimums by loan type (2026)

• Conventional (Fannie Mae/Freddie Mac): 620 minimum, but realistically 640+ for approval at a non-predatory rate.
• FHA: 580 with 3.5% down; 500–579 with 10% down. This is the main path for bad-credit buyers.
• VA: no official minimum, but most lenders want 580–620. Zero down if you qualify through military service.
• USDA: no official minimum, most lenders want 640. Zero down for eligible rural/suburban areas.

Below 580, your realistic options are FHA with 10% down (if you can find a lender), a non-prime loan (expensive), or waiting and fixing credit. Below 500, no mainstream loan exists — don't let anyone tell you otherwise.

FHA loans: the realistic bad-credit path

FHA loans are government-backed, so lenders can approve lower credit scores with small down payments. This is how most sub-640 buyers get into a house.

The costs nobody leads with:

• Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the loan amount, rolled into the loan. On $285,000, that's about $5,000 added to your balance.
• Annual Mortgage Insurance Premium (MIP): 0.45–0.85% of the loan per year, paid monthly. With 3.5% down, this insurance is permanent for the entire 30-year loan — unlike private mortgage insurance (PMI) on conventional loans, which drops off at 20% equity. The only way to remove FHA MIP is refinancing later.

The approval requirements beyond score:

• Steady 2-year employment history (gaps need explanations, not necessarily denial).
• Debt-to-income ratio usually capped at 43% (sometimes 50% with compensating factors).
• No bankruptcies in the last 2 years (Chapter 7) or 1 year (Chapter 13 with payment history).
• No foreclosures in the last 3 years.
• The house itself must pass an FHA appraisal (safety/condition standards — harder on fixer-uppers).

One strategy I used: an FHA-approved housing counselor (free, through HUD) reviewed my situation before I applied and told me exactly what to fix. Took 45 minutes and saved me a wasted hard inquiry.

Conventional loans with sub-680 credit

Conventional loans are possible at 620+ but the pricing is worse — you'll pay a Loan Level Price Adjustment (LLPA), effectively a higher rate or fees. The advantage over FHA: PMI drops off automatically at 22% equity, so a conventional loan can end up cheaper long-term if you reach 20% equity quickly (appreciation, principal paydown, or buying below appraisal).

My honest take: at 620–660, compare both quotes side by side. Ask the loan officer to show you the 5-year total cost (down payment + closing costs + 5 years of payments + mortgage insurance), not just the rate. The answer varies by loan size and how fast your area appreciates.

Quick credit score fixes (30–120 days)

Before you apply, these moves can realistically move your score 30–80 points in 3–4 months. I gained 55 points in 10 weeks:

1. Pay down credit card balances to under 30% utilization — ideally under 10%. Utilization is about 30% of the score's movement and responds fast. I moved $4,000 from a maxed card to a personal loan at 9% — score jumped 28 points when the cards reported low balances. Counterintuitive, but scoring models reward it.
2. Check your credit reports for errors. 1 in 4 reports have an error that hurts a score. Get free reports at AnnualCreditReport.com. I found a collection account that wasn't mine — disputed it, it was removed in 35 days.
3. Become an authorized user on a family member's old, well-managed credit card. Their history appears on your report. Only do this with someone who pays on time and has low utilization.
4. Don't close old cards before applying — length of history matters. And don't open new accounts either — new inquiries and zero-history accounts temporarily cost points.
5. Pay everything on time for 12 months. Payment history is 35% of the score. One 30-day late payment can cost 60–100 points and takes 7+ months to fade in importance.

Services like Experian Boost can add phone/utility payments to your report — small help (often 5–15 points), free, worth doing.

Other factors lenders actually weigh

Credit score isn't the whole decision. Strong compensating factors can offset weak credit:

• Big down payment: 10–20% instead of 3.5% makes you a much safer borrower and can offset score concerns.
• Cash reserves: 2–6 months of mortgage payments in the bank after closing shows you can survive an income interruption.
• Low DTI: if your debts are under 30% of income, that's a strong compensating factor. The mortgage affordability math matters here — check what payment you'd actually qualify for with a standard 28/36 affordability calculation (housing under 28% of gross income, total debts under 36%). My loan payment calculator shows what the higher bad-credit rate actually costs per month.
• Stable income: salary/W-2 employment beats self-employment with 1 year of history. If self-employed, you'll need 2 years of tax returns showing solid net income.
• Non-traditional credit history: FHA allows lenders to build a credit score from rent, utility, and insurance payments if you're "credit invisible."

Wait or buy now? The real math

Don't assume bad-credit buying is always a mistake, and don't assume waiting is always smart. Run the numbers:

• Cost of buying now: the rate penalty (~0.7–1.5% higher) + FHA MIP, usually $150–300/month extra vs a clean borrower, plus refinance costs later ($3,000–6,000) once your credit improves to remove MIP.
• Cost of waiting 12 months: another year of rent with no equity, plus possible home price appreciation in your market. If homes appreciate 4% and you're buying $300k, waiting costs ~$12,000 in price plus rent that builds nothing.

If prices in your market are flat or falling, waiting and fixing credit usually wins. If prices are rising 5%+ a year and rent is climbing too, the rate penalty might cost less than the appreciation you'd miss — and you can refinance in 12–18 months when your score improves (assuming rates cooperate). Use a basic mortgage calculator to compare the two payments honestly, and factor the higher rate into your monthly budget before you commit.

The scams to avoid

• "We guarantee approval regardless of credit." Legitimate lenders have underwriting standards. Guarantees are bait for predatory rates and fees.
• Upfront fees before any loan commitment. Legitimate lenders charge application/appraisal fees through the process, but thousands upfront to "fix your credit and get the loan" is a scam.
• Credit repair companies charging $100–300/month. Everything they do (dispute errors, negotiate pay-for-delete, add tradelines) you can do yourself for free. The legitimate fixes take time; nobody can remove accurate negative information.
• Adjustable-rate or interest-only loans pitched as "easier to qualify." They're easier to qualify for now and painful later. At bad credit, stick to fixed-rate FHA or conventional.

Bad credit isn't a life sentence — it's a 12–24 month project. Get your free reports, fix errors, crush utilization, and talk to an FHA-approved lender (or a HUD counselor first, for free). Know your real payment using the 28/36 rule and my loan payment calculator before you start shopping, and walk into the process knowing your options instead of hoping someone approves you.

I bought my first house with a 615 score and learned all of this the expensive way. This site is one person writing about money — not a lender, just what actually worked.