Home Loan Options for Less Than Perfect Credit: Find a Mortgage Lender
You can often get a mortgage with less than perfect credit. FHA loans accept scores as low as 500 with 10% down, and 580 with 3.5% down. VA has no minimum of its own. USDA lenders usually look for around 640, and conventional lenders typically want 620. Lenders can set stricter rules than the programs do, so the answer can change from one lender to the next.
“Less than perfect credit” covers a lot of ground. It can mean a low score, late payments, collections, a past bankruptcy or foreclosure, or little to no credit history at all. A credit score is a number that works like a report card for how you have handled borrowed money. Lenders read it, but they also read the story behind it. This page walks through how each loan treats each of those situations, so you know where you stand before you apply.
What Credit Score Do You Need to Get a Mortgage?
Every loan program has a different floor, and many lenders add their own on top. The table below shows both. Think of the program rule as the law and the lender rule as the house rules.
| Loan | Lowest score the program allows | What lenders often want | Down payment |
|---|---|---|---|
| FHA | 500 | Many start at 580, some at 600 or 620 | 10% for scores 500 to 579; 3.5% for 580 and up |
| VA | No VA minimum | Often 580 to 620 | None required |
| USDA | No fixed minimum; set by the lender and USDA’s automated system | Around 640 | None required |
| Conventional | None in Fannie Mae’s automated system for files created on or after November 16, 2025 | Most lenders look for 620 | Varies by program |
These are starting points, not promises. A score alone never approves or denies a loan. Lenders also weigh your income, your monthly debts, your savings, and the home itself.
Next step: pull your credit reports and note your lowest score. That number tells you which rows of the table to look at first.
How Each Loan Handles Low or Poor Credit
Each program treats a lower score a little differently. Here is what to expect from each one.
FHA Loans and Lower Credit Scores
FHA has the lowest published score floor of the four. If your score is 580 or higher, you can put as little as 3.5% down. If it is between 500 and 579, the loan is capped at 90% of the home’s value, which means about 10% down. Below 500, you are not eligible for a standard FHA loan.
Here is what else to know about FHA:
- When two people apply together, FHA looks at the lower of their two scores.
- If your score is under 580, or you have no score, the file is usually underwritten by hand. Your housing payment generally cannot go above 31% of your income, and your total monthly debts generally cannot go above 43%.
- FHA charges mortgage insurance. The upfront premium is 1.75% of the loan amount, and there is also an annual premium. See the current FHA mortgage insurance premiums.
- Starting with case numbers assigned on or after January 1, 2027, FHA will also accept newer scoring models, FICO 10T and VantageScore 4.0, alongside classic FICO. The score thresholds above do not change.
Learn more about this program on our FHA loan page.
VA Loans and Low Credit Scores
VA does not set a minimum credit score. That decision belongs to each lender, and many lenders start somewhere between 580 and 620. VA looks closely at the whole picture, and it has two tools that help buyers with weaker credit.
First, the 41% debt-to-income guideline is not a hard cap. Debt-to-income ratio, or DTI, compares your monthly debts to your monthly income. VA also looks at residual income, which is the money left over each month after your bills. A high residual income can support an approval even when your DTI runs higher.
Second, VA is flexible on certain collections. Medical collections may be disregarded unless they become a judgment or a lien. Non-medical collections do not automatically have to be paid off. See our VA loan page for the full program.
USDA Loans and Low Credit Scores
USDA does not publish a fixed minimum score. Instead, USDA’s automated underwriting system, called GUS, scores your whole file. GUS is like a scorecard that weighs your credit, income, and debts all at once. Most lenders look for a score around 640 so the file can run through GUS cleanly. Files that need a manual review can take longer.
USDA benchmarks are 29% of your income for the housing payment and 41% for total debts. Your household income must also fall under your county’s limit, and the home must be in an eligible area. One extra check applies to USDA: lenders look up delinquent federal debt in a database called CAIVRS. Unpaid federal debt, such as a defaulted student loan, can block a USDA loan until it is cleared. Read more on our USDA loan page.
Conventional Loans and Low Credit Scores
Conventional loans are not backed by a government agency. Fannie Mae removed its 620 minimum for loans run through its automated system, Desktop Underwriter, for files created on or after November 16, 2025. In practice, most lenders still look for a 620 or higher. The change mainly helps borrowers with strong savings or income, or thin credit files.
A lower score also costs more on a conventional loan. Lenders price the rate by score, and private mortgage insurance usually costs more when your score is lower. Compare that with FHA before you decide, since the cost picture can flip. See our conventional mortgage programs.
Waiting Periods After Bankruptcy, Foreclosure and Short Sale
Waiting periods run from about 12 months to 7 years, depending on the loan and the event. FHA requires 2 years after a Chapter 7 bankruptcy and 3 years after a foreclosure, according to HUD Handbook 4000.1. VA is usually 2 years for both, USDA is 3 years, and conventional is 4 years after a Chapter 7 and 7 years after a foreclosure. The clock usually starts at the discharge date for a bankruptcy and the date the title transfers for a foreclosure.
| Event | FHA | VA | USDA | Conventional |
|---|---|---|---|---|
| Chapter 7 bankruptcy | 2 years from discharge; 12 months may work with extenuating circumstances | 2 years from discharge; 1 to 2 years may be considered | 3 years | 4 years from discharge; 2 years with extenuating circumstances |
| Chapter 13 bankruptcy | Possible during the plan after 12 months of on-time payments and court permission | Possible during the plan after 12 months of on-time payments and trustee or judge approval | Possible after 12 months of on-time plan payments | 2 years from discharge or 4 years from dismissal |
| Foreclosure | 3 years from title transfer | 2 years | 3 years | 7 years; 3 years with extenuating circumstances |
| Short sale | 3 years, with exceptions | Reviewed case by case | 3 years | 4 years; 2 years with extenuating circumstances |
Extenuating circumstances means something outside your control, such as a serious illness or the death of the main earner. They must be documented, and hardship alone does not count. Meeting a waiting period also does not guarantee approval. Lenders can add their own waiting periods.
For more detail, read our guides to getting an FHA loan after bankruptcy and a VA loan after bankruptcy.
Collections, Charge-Offs, Late Payments and Judgments
You often do not have to pay off every collection to buy a home, but the rules depend on the loan and the amount. A collection is a bill that a creditor sold or handed to a collection agency. A charge-off is a debt the original lender wrote off as a loss. You still owe it, and it still appears on your report.
Here is how lenders commonly treat them:
- FHA: the lender may ask for a payoff, a documented payment plan, or a monthly amount counted in your debts. Lenders often use 5% of the balance for that monthly amount.
- VA: medical collections may be disregarded. Non-medical collections are not automatically paid off. With no payment plan, the lender counts about 5% of the balance, divided by 12, as a monthly payment.
- Judgments: a court judgment usually must be paid or put on a repayment plan. For VA, that generally means 12 on-time payments.
- Late payments: recent late payments matter most, especially on past mortgages or rent. Older ones count less as time passes.
Before you pay off or dispute anything, ask a loan officer how it will be treated. The order of what you do can matter.
Next step: write down every collection, charge-off, and judgment you know about, with the balance and the date, so you can review the list with a lender.
No Credit or Thin Credit
No score is a different problem than a low score. You may not have a score because you have little history, or you have never borrowed money. FHA allows loans for borrowers with no score, using what lenders call nontraditional credit. This means your on-time payments for things like rent and utilities help show how you handle bills. These files are underwritten by hand.
Lenders may ask for rent records such as canceled checks, bank statements, or documents from a property manager. Ask your lender which nontraditional items they accept, since lenders vary.
Lender Overlays: Why One Lender Says No and Another Says Yes
A lender overlay is a rule a lender adds on top of the program’s own rule. FHA may allow a minimum credit score of 580, for example, but a lender may require 620. That is why one lender can turn you down while another approves the same file.
If another lender turned you down, ask whether it was the program’s rule or that lender’s own overlay. Our guide to mortgage overlays explains how to tell the difference.
What a Lower Score Can Cost When Buying a Home
A lower score can raise both your mortgage rate and your mortgage insurance cost. The examples at the bottom of this page show payments on a $250,000 home using the rates on our current rates page. Those rates assume a 680 credit score, so a lower score may mean a higher rate than shown.
For the FHA example, putting 10% down instead of 3.5% lowers the loan amount and the monthly payment. That is one reason the 500 to 579 tier is not just a hurdle. It also changes the math.
Next step: use our payment calculator to test different loan amounts and rates.
Steps to Get Ready for a Mortgage Loan With Less Than Perfect Credit: Improve Your Credit
Most buyers in this spot follow a similar path. Here are the steps.
- Pull your credit reports from all three bureaus. You can get them through our free credit report guide.
- Check for mistakes, such as accounts that are not yours or wrong balances.
- Gather papers for any past events, such as bankruptcy discharge papers or a collection payoff letter.
- Keep credit card balances low and avoid opening new credit before you apply. Our guide on how to improve your credit score covers this in more detail.
- Review your monthly debts. Our debt-to-income ratio guide shows how lenders count them.
- Talk to a loan officer early. A pre-approval shows what you can afford with your actual credit.
Less Than Perfect Credit FAQs
These are the questions we hear most from buyers with lower scores. In short, FHA accepts scores from 500, and 580 with 3.5% down. VA sets no minimum score. USDA sets no fixed minimum either, according to USDA’s guaranteed loan fact sheet, but lenders look for about 640, and conventional lenders typically want 620. Past events like bankruptcy and foreclosure add waiting periods of 2 to 7 years. Short answers come first, and the sections above cover each topic in more detail.
What is the lowest credit score you can buy a house with?
For a standard FHA loan, the lowest score is 500, with about 10% down. At 580 or higher, you can put 3.5% down. VA, USDA, and conventional loans do not have the same fixed floor, but most lenders look for scores in the 580 to 640 range.
Can I get a mortgage with a 500 credit score?
Sometimes. FHA allows a 500 score, but you need about 10% down, and the loan is underwritten by hand with tighter debt limits. Many lenders add their own minimum above 500, so you may need to ask around.
Can I buy a house with a 580 credit score?
Yes, it is possible. A 580 score meets FHA’s requirement for 3.5% down. Approval is not guaranteed, and some lenders set a higher minimum, such as 600 or 620.
Can I get a mortgage with bad credit mortgage lenders?
Often, yes. “Bad credit” has no official definition, but most programs have a path for lower scores, past collections, and even past bankruptcies once the waiting period passes. FHA is the program most commonly used for lower scores, since its published floor is the lowest.
Past problems add waiting periods rather than permanent bans, such as 2 years after a Chapter 7 bankruptcy and 3 years after a foreclosure for FHA, according to HUD’s FHA guidelines.
Do I have to pay off collections before I buy a home?
Not always. The rules depend on the loan type and the size of the debt. A lender may ask for a payoff, a payment plan, or just count a monthly amount in your debts. VA may disregard medical collections. Ask a loan officer before you pay anything.
How long after bankruptcy can I get a mortgage?
It depends on the loan and the type of bankruptcy. Chapter 7 is generally 2 years for FHA and VA, 3 years for USDA, and 4 years for conventional. Chapter 13 can sometimes qualify during the plan after 12 months of on-time payments.
Can I get a mortgage with no credit score?
Yes. FHA allows loans with no score using nontraditional credit, such as rent and utility payments. These loans are underwritten by hand, and some lenders have extra rules.
Can a co-borrower help me qualify?
It can, but the co-borrower’s credit counts too. FHA uses the lower of the two borrowers’ scores. A co-borrower can still help with income and debt ratios. See our guide to a non-occupying co-borrower.
Does a larger down payment help with a lower credit score?
It can. A larger down payment lowers the amount you borrow, and lenders often treat savings as a strength. On FHA, a score from 500 to 579 requires about 10% down by rule.
Can I refinance my mortgage with less than perfect credit?
Often, yes. If you already have an FHA, VA, or USDA loan, a streamline refinance can skip most of the credit review, according to HUD’s streamline guidance. The FHA Streamline needs 12 months of payment history and no appraisal. The VA IRRRL also needs no appraisal, and a fixed-to-fixed loan needs a rate at least 0.50% lower. The USDA Streamlined-Assist needs your payment to drop by at least $50 a month and has no debt-to-income ratio check. A standard refinance does review your credit. At Union Home Mortgage, an FHA rate-and-term refinance starts at a 580 score, and an FHA cash-out refinance at 600.
Should I apply for a mortgage now or wait to improve my credit?
It depends on how your credit compares with the loan you want, and a lender can check that without you committing to anything. Applying now can work when you already meet a program’s minimum score and any waiting period. Waiting can help if you are just under a cutoff or a waiting period hasn’t ended. An FHA score of 580 instead of 579, for example, cuts the required down payment from 10% to 3.5%. Time also matters after a bankruptcy. A conventional loan generally requires 4 years after a Chapter 7, or 2 years with documented extenuating circumstances, according to Fannie Mae’s Selling Guide.
Talk With a Loan Officer About Your Credit
Ready to see where you stand? Call 262-305-0680 or fill out a mortgage application and apply online, and our team will review your options with your actual credit.
FHA Loan Example (3.5% down, 30-year fixed rate): $250,000 sales price, $8,750 down payment, $245,472 loan amount (includes $4,222 FHA upfront mortgage insurance premium), 7.500% interest rate, 7.647% Annual Percentage Rate, $1,716.38 principal and interest payment.
FHA Loan Example (10% down, 30-year fixed rate): $250,000 sales price, $25,000 down payment, $228,938 loan amount (includes $3,938 FHA upfront mortgage insurance premium), 7.500% interest rate, 7.658% Annual Percentage Rate, $1,600.77 principal and interest payment.
VA Loan Example (0% down, 30-year fixed rate): $250,000 sales price, $0 down payment, $255,375 loan amount (includes $5,375 first-time use VA funding fee), 7.625% interest rate, 7.768% Annual Percentage Rate, $1,807.53 principal and interest payment.
USDA Loan Example (0% down, 30-year fixed rate): $250,000 sales price, $0 down payment, $252,500 loan amount (includes $2,500 financed USDA upfront guarantee fee), 7.125% interest rate, 7.265% Annual Percentage Rate, $1,701.14 principal and interest payment.
Taxes, insurance, and mortgage insurance will be part of the total monthly mortgage payment but are not included in the above examples. These examples are for illustrative purposes only and may differ from the current interest rate offered. Call for the current rate and full disclosure of current terms.
Union Home Mortgage is not acting on behalf of or at the direction of HUD, FHA, VA, USDA, Fannie Mae, Freddie Mac, or the Federal Government. These materials are not from any of these agencies and were not approved by them or by a government agency.
The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs, and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above.
Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice, please consult an appropriate professional in one of these fields.
