The listings featured on this site are from companies from which this site receives compensation. This influences where, how and in what order such listings appear on this site. 
Advertising Disclosure

How to Get a Home Loan When You Have Bad Credit

How to Get a Home Loan When You Have Bad Credit

Bad credit may seem like it stands between you and a new home purchase. Fortunately, there are ways to get a mortgage even with bad credit.
By taking the proper steps, you can get a mortgage loan with bad credit, and this transaction can even help you to improve your credit for the future. It’s important to learn about the process and discover the facts about low credit scores and mortgage lending.

What’s a Low Credit Score?

A credit score ranges from 300 to 800 for the 4 different credit reporting bureaus. When considering large lines of credit, like a home mortgage, any credit score lower than 580 is considered high-risk (i.e. “bad”). Many factors go into these low scores, including lack of established credit, missed payments, and the amount of available credit that you have already been given. A number of free credit report websites can offer details on your credit score and the credit history that has impacted it. If your credit score is lower than 580, there are still options available for mortgages and home purchases.

FHA Loans for Buyers With Bad Credit

One of the best options for home buyers with bad credit is an FHA loan. These loans were established to encourage home purchases for first-time buyers, and they allow people with bad credit to  obtain a loan. If your credit score is under 580, you are required to pay 10% down on a home in order to qualify for the loan. For example, if a home costs $150,000, you will need at least $15,000 to get approved for the FHA loans. If your credit score is above 580 but still too low to qualify with traditional lenders, you may be able to obtain an FHA loan with only a 3.5% down payment.

Along with getting approved for the loan, the FHA agreement comes with several benefits. To help make the home affordable, FHA loans often include lower interest rates, lower mortgage insurance fees, and reduced closing amounts.

Showing Responsibility for Paying Back a Loan

Even if your credit is low, recent actions can improve your chances of getting approved for an FHA loan. Once you apply for a mortgage through a lender, they will take a detailed look at your recent credit history. Showing signs of improvement and responsibility can make a big difference in your ability to get approved. By paying back other debts and consistently doing it on time, you can show that you would be a responsible buyer. For at least 6 months to a year, you should have on-time payments for any bills or other credit that you may have. Waiting this out and focusing on current payments can help you get approved for an FHA mortgage in the near future.

How Can You Increase the Odds of Getting Approved?

Keeping your credit record clean and clear of any red flags is an ideal way to get approved for a loan. For example, it’s not a good idea to cosign on any other loans or credit applications for family and friends. This can directly impact your score and may look bad on a mortgage application. It’s also a good idea to choose a mortgage amount that is realistic and affordable. If you cannot afford the 10% down payment for an FHA loan, consider shopping around for lower-cost homes.

Ensuring your financial stability is the best way to show lenders that you are a qualified buyer. This includes making payments on time, keeping the same employer, and building a proper savings account. All of these factors can combine with your credit score to help you get approved for a loan.

What are the Next Steps If You’ve Been Turned Down?

Getting turned down for a home loan may feel devastating, but it is not the end of the line. By being proactive, you can improve your situation and help increase your chances of getting approved for a loan in the future. One of the main things to focus on is increasing your credit score.

To help get approved for new credit, you can apply for a secured credit card. These credit cards require a deposit placed on them in an amount equal to your starting credit line. For example, you may apply for a secured credit card with a $250 deposit. This deposit would give you a $250 credit line that can be used to make purchases and monthly payments. When reporting to credit bureaus, the card shows up as normal credit and allows you to build up your score.

It’s also good to start saving as much money as you can at the same time. Building a larger savings account can help you make a larger down payment and get the mortgage loan approval that you seek.

Brick by brick, you can knock down the wall of bad credit and enjoy your future in a new home.

By understanding your low-credit options, you can still get approved for a mortgage.

Don’t let a low credit score stop your home-buying dreams. Check out the best FHA mortgage lenders for borrowers with bad credit.

Top 5 Mortgage Lenders


Quicken Loans

Visit site

Layer 1


Visit site

Rocket Mortgage

Visit site

Veterans United Home Loans

Visit site

New American Funding

Visit site

This site is a free online resource that strives to offer helpful content and comparison features to our visitors. We accept advertising compensation from companies that appear on the site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company listings on this page DO NOT imply endorsement. We do not feature all providers on the market. Except as expressly set forth in our Terms of Use, all representations and warranties regarding the information presented on this page are disclaimed. The information, including pricing, which appears on this site is subject to change at any time.


The California Consumer Privacy Act (CCPA), gives residents of the state of California the right to prevent businesses from selling their personal information. takes your privacy very seriously. We support the CCPA by allowing California residents to opt-out of any future sale of their personal information. If you would like to record your preference that will not sell your data, please check the box below. Please note, your choices will only apply to the browser you are using to submit this form. This also means that if you clear browser cookies, you will need to opt-out again.