Can I Buy a House With Bad Credit?

Your credit score plays a big role in your home-buying journey because it gives lenders a comprehensive look at how you’ve managed your finances over time. If you have bad credit and you're wondering whether you can even buy a house, the short answer is: possibly, though your mortgage could come with extra fees and higher interest rates. 

If you're concerned about whether you can qualify for a loan, consider having a conversation with a lender. Many lenders will talk to you about your eligibility with no obligation to apply for a loan.

Here are specifics on what you can expect when trying to buy a house with less-than-great credit.

What is considered bad credit?

There are three credit bureaus that use their own methods to calculate your credit score: Equifax, Experian, and TransUnion. Most mortgage lenders use what’s called a FICO score to gauge people’s creditworthiness; it ranges from 300 to 850. Usually, a score under 580 is considered “poor.” If you’re planning on buying a house with all cash, you can buy a house with any of these scores, and even no credit score. But if you’re looking to finance any portion of your home purchase, a higher score will give you more buying power because it shows mortgage lenders you’re a responsible borrower.

Don’t forget that you can check your credit report for free — that way, you’re not just estimating what your score might be. Federal law allows you to get free copies of your reports under the federal Fair and Accurate Credit Transaction Act (FACTA).

Low credit vs. good credit vs. no credit

Let’s look at the differences between the three categories credit scores are generally split into, and when you don’t have a score.

Low credit score

The lowest FICO score you can have if you want to secure a mortgage loan is usually around 500. Just know that having a low credit score will come with a higher interest rate, and you’ll need to provide a larger down payment. We’ll go further into this below.

Good credit score

A good FICO credit score starts at 670 and up. Having a higher credit score means you could get a lower interest rate on your mortgage. And you want to get the lowest interest rate. A rate that’s even 0.25% lower means you’ll save thousands of dollars over the life of your loan.

No credit score

Yes, you can still buy a home with no credit, but you may have to do so in cash. Not having a credit score means you don’t have any active credit accounts reported to one of the three credit bureaus. If you don’t have cash to buy a home, you might benefit from building your credit history first.

The extra costs of a mortgage with bad credit

Getting approved for a mortgage when you have a low credit score is already a success in itself, but it also comes with its downsides.

Higher interest rates

The interest rate on your mortgage could be whole percentage points higher, depending on your score and your lender. And the higher your interest rate is, the more money you’re paying on top of the actual cost of your home.

Larger down payment requirements

Your lender may need you to put down more cash upfront, to help mitigate their risk of losing money if you end up defaulting on your mortgage. A downpayment on a conventional loan can range from 3% to 20% of a home’s total purchase price. For some perspective, the average home’s value in the U.S. is about $365,887 as of April 2025, according to Zillow’s Home Values Index. So a 20% down payment on that would be about $71,400.

Each lender decides how much they want you to put down based on their own internal policies. Ask any potential lenders how much they might require you to put down based on your score and income. Remember to shop around for lenders! 

Higher fees

Lenders sometimes include extra or higher fees to help them offset the risk they’re taking by lending you money. That could look like origination fees —  these cover the administrative costs of creating your mortgage loan — or underwriting fees — fees lenders charge for analyzing your loan application and figuring out the amount of risk involved in lending to you. A loan origination fee typically costs between 0.5% and 1% of the total loan amount, but could be higher depending on the lender. And underwriting fees can start at $500 and go upwards of $1,000.

How to buy a house with bad credit

There are many reasons you might have a low credit score, from inconsistent debt history, to missed payments. Either way, a low credit score could signify that you’re more likely to have issues making payments on your mortgage. Still, buying a home with a low score can be possible if you take the right steps. 

If taking steps to repair your credit score isn’t an option, here are some things to think over as well:

Consider getting an FHA, VA, or USDA loan

The minimum credit score you'll need to buy a home depends on the loan type. For example, if you’re going for a conventional loan, the minimum required score is 620. Lenders may also have different requirements based on other factors, like how much money you’re putting down, or how much money you make.

You may qualify for a Federal Housing Administration loan with a score as low as 500 — though most lenders require something closer to 580. FHA loans are also a good option because they require a down payment of 3.5%, which is far less money upfront than the 20% downpayment that’s recommended for conventional loans.

Department of Veterans Affairs (VA) loans and United States Department of Agriculture (USDA) loans don’t require a down payment, though they come with their own fees if you don’t put down 20%. They also don’t have credit score requirements, but your lender can tack on their own if they want to. For VA loans, for example, lenders tend to set the minimum at 620.

Check your BuyAbility℠

Before you get too far into your home-buying journey, figure out your BuyAbility℠ so you can know what you can afford to pay for a house based on your credit score and income. BuyAbility℠ is a free tool from Zillow Home Loans that connects your personal financial picture with current mortgage rates. And once you know your BuyAbility℠, Zillow lets you use that information to look for homes that fit your budget.

Save up for a large down payment

If you tell a lender that you have a significant amount of money saved for your down payment, that could give them more confidence that you’ll be a responsible borrower who is committed to paying your mortgage, even if your credit score is low.

You could have a number of options to save up for a down payment, like making small lifestyle changes. Of course, this depends on your financial situation.

Depending on how low your score is, a lender may require you to put down a certain amount anyway — at least if you’re going for a conventional loan. While this type of loan doesn’t usually require 20% down, a lender could ask for that much because of your low score. They want more assurance that if you don’t pay your mortgage, at least they’ll get 20% of their investment back.

Lower your debt-to-income ratio

Lenders don’t want to see applicants with a high debt-to-income ratio, or DTI. This figure shows how much of your monthly income goes toward paying your debts. So if you spend a lot of your money paying off things like personal loans or credit cards, you’ll have a high DTI, and lenders may not trust that you can afford to pay a mortgage on top of that.

There are a few ways to lower your DTI, like paying off all your debt or start making more money. And if neither of these methods is an option for you, there are a few other approaches to get it done.

Look for a co-borrower

You could look into purchasing a home with a co-borrower. This could be your spouse, a close relative, or someone else who you truly trust, who trusts you, and who you have a solid relationship with. Your co-borrower will be listed on your mortgage and on your home’s title, making them an owner of your home as well.

Fixing or preventing bad credit

There are various ways you can improve your credit score, like looking for errors in your credit report, or using less of your available credit.

Mortgage lenders look at the “age,” dollar amount, and payment history of your different credit lines. Credit lines can come in the form of credit cards, a car loan, or student loan debt, to name a few. 

Your credit score can be hurt by opening a lot of accounts frequently, running up your balances, and not paying your balances on time, or at all. Just changing one of these things can boost your credit score. If you’re renting, paying your rent can help your score too. Here are some tips to remember as you try to improve your credit score:

• DON'T close an account to remove it from your report (it doesn't work).
• DON'T open too many credit accounts in a short period of time.
• DON'T take too long to shop around for interest rates. Lenders must pull your credit report every time you apply for credit. If you are shopping around with different lenders for a lower interest rate, there is generally a grace period of about 30 days before your score is affected. Too many “hard credit pulls” could weaken your score.

• DO check your credit report for any errors and get them corrected. This can help raise your score.
• DO pay your bills on time, like any loans or credit card debt. Late payments can significantly lower your score.
• DO keep your credit card balances low — specifically, keep your total credit usage below 30%, as a general rule of thumb.

If you successfully improve your credit score, you might still need to warn any prospective lenders that there may be some signs of bad credit history in your report. This can help them avoid any surprises while they try to approve you for a loan, and they can find a loan that better suits your financial situation.

Why were you turned down for a loan?

If you are still having trouble getting a loan, ask your lender why. Bad credit is just one of many reasons you may be denied for a loan. Other reasons you may be denied could include:

• Overextended credit cards: If you miss payments or exceed your limit, that's a red flag to lenders.
• Failure to pay a previous or existing loan: If you’ve defaulted on other loans, lenders will think twice about giving you another.
• Bankruptcy: Filed for bankruptcy in the past seven years? You might have trouble getting a loan.
• Overdue taxes: Lenders check your tax payment record.
• Legal judgments: If you have a judgment against you for such things as delinquent child support payments, it could harm your credit.
• Collection agencies: Lenders will know if collection agencies are after you.
• Overreaching: You might be seeking a loan outside what you can reasonably afford.

Your score may be low right now, but you can change that with some time and dedication. There is still hope! Keep your head up, and get that score up, too!