How to Qualify for a Mortgage with a Low Credit Score

15 July 2025

Buying a home is one of the biggest financial steps you’ll ever take, but what if your credit score isn’t exactly stellar? If you've been told that a low credit score is a deal-breaker for getting a mortgage, don't lose hope just yet. While it’s true that a higher credit score makes the approval process easier, there are still plenty of ways to qualify for a home loan even if your credit score isn't perfect.

In this guide, we'll break down actionable steps you can take to improve your chances of getting approved. Let’s dive in!

What Credit Score Do You Need for a Mortgage?

Before we get into how to qualify, let’s talk numbers. What exactly is considered a "low" credit score in the mortgage world?

Lenders typically look for a credit score of at least 620 for conventional loans. However, if your score falls below that, don’t panic. Some mortgage programs, like FHA, VA, and USDA loans, cater specifically to borrowers with lower credit scores.

Here’s a general idea of what different loan types require:

- Conventional Loans – Minimum score: 620
- FHA Loans – Minimum score: 500 (with a 10% down payment) or 580 (with a 3.5% down payment)
- VA Loans – No strict minimum (but lenders usually prefer 580–620)
- USDA Loans – Usually require a 640 or higher, but some lenders may accept lower scores

Even if your credit score is on the lower end, there are still strategies you can use to improve your chances of loan approval.

Tips to Qualify for a Mortgage with a Low Credit Score

1. Save for a Larger Down Payment

If your credit score isn’t great, a larger down payment can help compensate. Why? Because lenders see it as you having more financial skin in the game.

A bigger down payment reduces the lender's risk, making you a more attractive candidate for a mortgage. While many loans require a minimum of 3-5% down, putting 10-20% down can make a world of difference when you have bad credit.

2. Consider an FHA Loan

FHA loans are government-backed and designed for borrowers with lower credit scores. With a score as low as 500, you can still qualify – although you'd need a 10% down payment. If you have a 580 or higher, you can go with just 3.5% down.

These loans do come with mortgage insurance premiums (MIP), but they can be a great pathway to homeownership if the traditional route isn’t an option.

3. Get a Co-Signer or Co-Borrower

If you have a trusted family member or friend with strong credit, having them co-sign the loan can improve your approval odds.

A co-signer takes on responsibility for the loan if you default, giving the lender more reassurance. While this can be a great solution, it's a huge responsibility for the co-signer, so make sure both parties understand the commitment.

4. Improve Your Debt-to-Income Ratio (DTI)

Lenders don’t just look at your credit score—they also consider your debt-to-income ratio (DTI), which is the percentage of your monthly income that goes toward debt payments.

A high DTI can be a red flag, even if your credit score is decent. To improve your chances:

✔ Pay down existing debt
✔ Avoid taking on new debt before applying for a mortgage
✔ Increase your income if possible

A DTI of 43% or lower is generally preferred by lenders.

5. Work with a Specialized Lender

Some lenders specialize in working with borrowers with lower credit scores. These lenders offer flexible mortgage programs tailored for those who might not meet conventional loan requirements.

It’s worth shopping around to see if you can find a lender that works with borrowers in your credit range. Don’t settle for the first lender who says no—there are plenty of options out there!

6. Show Proof of Financial Stability

Even if your credit score isn't great, strong financial habits can work in your favor. Lenders may be willing to approve you if you can show financial responsibility in other ways, such as:

- Stable employment history
- A solid rental history (showing you’ve been paying rent on time)
- Significant savings (having extra cash in the bank can show lenders you’re financially prepared)

Some lenders may also consider alternative credit data, such as utility and cellphone payments, to assess your financial responsibility.

7. Consider Making Your Spouse the Primary Borrower

If you’re buying a home with a spouse or partner and they have a significantly higher credit score, you may want to list them as the primary borrower.

Doing so can boost your chances of approval and possibly help you secure a lower interest rate.

8. Look for First-Time Homebuyer Programs

Many states offer first-time homebuyer assistance programs that can help borrowers with low credit scores. These programs often provide:

✅ Down payment assistance
✅ Lower interest rates
✅ Flexible credit score requirements

Check with your state’s Housing Finance Agency (HFA) to see what’s available in your area.

9. Improve Your Credit Score Before Applying

If you're not in a rush, taking a few months to improve your credit score can be a game changer. Here are some quick ways to boost it:

✔ Pay your bills on time – Payment history is 35% of your credit score
✔ Pay down high credit card balances – Keep credit utilization below 30%
✔ Avoid opening new credit accounts – Multiple recent inquiries can hurt your score
✔ Check your credit report for errors – Dispute any inaccuracies

Even a slight bump in your score could unlock better terms and interest rates!

What to Expect When Getting a Mortgage with Bad Credit

If you're applying for a mortgage with a low credit score, keep in mind:

- You may get a higher interest rate – Lenders see low-credit borrowers as higher-risk, which means they may charge a higher rate.
- You might need to provide more documentation – Expect to show proof of stable income, savings, and financial history.
- You could face higher mortgage insurance costs – FHA loans, for example, require mortgage insurance premiums (MIP), which add to monthly payments.

But don’t let these challenges discourage you! Many people successfully buy homes with less-than-perfect credit every day.

Final Thoughts

A low credit score doesn’t have to crush your homeownership dreams. With the right strategies—whether it’s saving for a bigger down payment, improving your financial habits, or exploring government-backed loans—you can still qualify for a mortgage.

Remember, your credit score is just one piece of the puzzle. Lenders also consider your income, employment history, and overall financial picture. So even if your score isn’t where you’d like it to be, there’s still hope!

Start planning today, explore all your options, and don’t be afraid to shop around for the best mortgage deal. Your dream home may be closer than you think!