The Truth About Buying a Home with Bad Credit

Buying a home with bad credit can feel like an uphill battle, but the truth is—it's not impossible. While a low credit score may limit your options or increase your borrowing costs, there are still pathways to homeownership. Understanding the facts and knowing your options can help you make informed decisions and take steps toward owning your dream home.

What Is Considered “Bad” Credit?
Credit scores typically range from 300 to 850. A score below 580 is generally considered poor, while 580–669 is considered fair. Conventional mortgage lenders usually prefer scores above 620, but government-backed loans, like FHA, can be more forgiving.

Can You Buy a Home with Bad Credit?
Yes, you can—but you’ll likely need to meet other criteria. FHA loans, backed by the Federal Housing Administration, allow for credit scores as low as 500 with a 10% down payment, or 580 with as little as 3.5% down. VA loans (for eligible veterans) and USDA loans (for rural and suburban buyers) also have flexible credit requirements.

What to Expect During the Process
With bad credit, lenders will take a closer look at your full financial picture. They’ll consider your income, employment stability, debt-to-income ratio, and savings. You may face higher interest rates or be required to make a larger down payment to offset the perceived risk.

Tips to Improve Your Chances

1. Check and Fix Errors: Review your credit report and dispute any inaccuracies.

2. Pay Down Debt: Lowering your credit utilization can help boost your score.

3. Avoid New Debt: Hold off on opening new credit accounts before applying for a mortgage.

4. Save for a Larger Down Payment: A larger down payment can strengthen your application.

5. Work with an Experienced Lender: Some lenders specialize in helping buyers with less-than-perfect credit.

Final Thoughts
While buying a home with bad credit isn't easy, it's far from impossible. With the right loan program, a solid plan, and a bit of patience, you can turn your dream of homeownership into a reality. If you're unsure where to start, reach out to a trusted real estate agent or mortgage professional to explore your options and map out a plan tailored to your situation.