Can a Low Credit Score Get You a Mortgage?

Your credit score is a three-digit number that lenders use to assess your creditworthiness. Most scores range from 300 to 850, with higher numbers indicating better credit health. Mortgage lenders typically use FICO scores, and the minimum score required depends on the type of loan you’re seeking.

• Conventional loans usually require a minimum FICO score of 620.
• FHA loans may accept scores as low as 500 with a larger down payment, but 580 is the more common minimum for a lower down payment.
• VA loans and USDA loans don’t have official minimums, but most lenders look for at least 580-620.

A low credit score signals to lenders that you may be a higher-risk borrower. This can affect your eligibility, the interest rates offered, and the size of your required down payment. However, having a low score doesn’t automatically disqualify you from getting a mortgage—it just means you’ll need to be strategic and well-prepared.

How Credit Scores Are Calculated:

Credit scores are calculated using several factors:

• Payment history (35%): Whether you pay your bills on time.
• Amounts owed (30%): Your total debt compared to your available credit (credit utilization).
• Length of credit history (15%): How long you’ve had credit accounts.
• New credit (10%): Recent applications for new credit.
• Credit mix (10%): The variety of credit accounts you have (credit cards, loans, etc.).

Understanding these factors can help you identify areas to improve before applying for a mortgage. For example, paying down credit card balances can quickly reduce your credit utilization and potentially boost your score.

Why Lenders Care About Credit Scores:

Lenders use your credit score to predict how likely you are to repay your mortgage on time. A higher score suggests lower risk, while a lower score means you may be more likely to default. This risk assessment influences not only whether you’re approved, but also the terms you’re offered—such as your interest rate, required down payment, and even the types of loans you can access.

Example:

If you have a score of 750, you’re likely to qualify for the best rates and lowest down payments. If your score is 580, you may still qualify for certain loans, but you’ll pay more in interest and may need a larger down payment. This difference can add up to a significant amount over the life of your loan.

Bottom Line:

While a low credit score makes getting a mortgage more challenging, it doesn’t make it impossible. Understanding how your score is calculated and how lenders use it is the first step toward homeownership, even if your credit isn’t perfect.

If you’re asking, "can a low credit score get you a mortgage?" the answer is yes—but with important caveats. In 2026, lenders still consider applicants with lower scores, but you’ll face stricter requirements and potentially higher costs.

Here’s what you can expect:

• Higher interest rates: Lenders offset risk by charging more. For example, someone with a score below 620 may pay significantly more in interest over the life of the loan than someone with a 740+ score. Even a small difference in interest rate can mean paying much more over the years.
• Larger down payments: FHA loans may allow scores as low as 500, but you’ll need a larger down payment. With a higher score, you may qualify for a lower down payment. Conventional loans often require a higher down payment for lower-score borrowers, and sometimes more.
• Limited loan options: Some programs, like conventional loans, may be out of reach until your score improves. FHA, VA, and USDA loans are often more accessible for those with lower scores, but each has its own requirements.
• Stricter documentation: Lenders may require more proof of income, assets, and explanations for any negative marks on your credit report.

Federal Protections:

Federal laws like the Fair Credit Reporting Act (FCRA) ensure you have the right to accurate credit reporting, and the Equal Credit Opportunity Act (ECOA) prohibits discrimination based on credit score alone. However, lenders are allowed to set their own risk standards within these laws. This means that while you can’t be denied solely for your score, lenders can use it as a significant factor in their decision.

Real-World Example:

Suppose you have a 580 credit score and apply for an FHA loan. You may qualify with a lower down payment, but your interest rate will likely be higher than someone with a 700+ score. If you have a 500-579 score, you’ll need to put more money down, and your options may be limited to certain lenders who are willing to take on more risk.

What This Means for You:

If your score is below 620, you should be prepared for:

• Higher monthly payments due to higher interest rates.
• More upfront cash needed for a down payment.
• Fewer lenders willing to work with you.
• More scrutiny of your financial situation.

Key Takeaway:

A low credit score doesn’t close the door on homeownership, but it does mean you’ll need to be more proactive, patient, and prepared to meet additional requirements.

Lenders look at more than just your credit score. They consider your entire financial profile, including:

• Debt-to-income (DTI) ratio: Lenders generally prefer a lower DTI, though some programs allow higher ratios with compensating factors. Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI shows lenders you have enough income to cover your mortgage and other debts.
• Employment history: Stable, verifiable income is crucial. Lenders typically want to see at least two years of steady employment in the same field. Gaps in employment or frequent job changes may raise red flags, especially if your credit score is already low.
• Down payment: A larger down payment can offset a low score. It reduces the lender’s risk and may help you qualify for better terms. For example, putting more money down on an FHA loan can help if your score is below 580.
• Savings and reserves: Having extra funds in the bank reassures lenders that you can handle unexpected expenses or temporary income loss. Some lenders require you to have a certain number of months’ worth of mortgage payments in reserve.

Documentation You’ll Need:

• Recent pay stubs and W-2s or tax returns (usually two years).
• Bank statements showing your savings and checking account balances.
• Documentation of other assets (retirement accounts, investments).
• Letters of explanation for any negative marks (late payments, collections, etc.).

Credit Report Review:

Under the FCRA, you’re entitled to a free credit report annually from each bureau. Review your reports for errors before applying—mistakes can drag your score down unnecessarily. Common errors include:

• Accounts that don’t belong to you.
• Incorrect late payments.
• Outdated negative information.

Dispute any inaccuracies with the credit bureaus. Even a small correction can improve your score and your chances of approval.

Compensating Factors:

If your credit score is low, lenders may look for compensating factors to offset the risk. These can include:

• A high income relative to your debts.
• A large down payment.
• Significant cash reserves.
• A history of on-time rent payments.

Tip:

If you’re struggling with credit issues, consider exploring credit repair strategies. Our credit repair category offers in-depth guides to help you get started. Taking time to improve your credit profile—even by a few points—can make a big difference in your mortgage options and costs.

Applying for a mortgage with a low credit score is possible, but there are pitfalls to watch out for:

• Not checking your credit report: Errors are common and can be disputed under the FCRA. Don’t assume your report is accurate—review it carefully for mistakes that could be dragging your score down.
• Making large purchases or taking on new debt: This can increase your DTI and lower your score further. Avoid financing new cars, furniture, or opening new credit cards before or during the mortgage process.
• Ignoring alternative loan programs: FHA, VA, and USDA loans may be more accessible than conventional loans. Don’t limit yourself to just one type of mortgage—explore all your options.
• Failing to shop around: Lenders have different risk appetites—some may be more flexible than others. Get quotes from multiple lenders to compare rates, fees, and requirements.
• Falling for scams: Be wary of companies promising guaranteed approval or instant credit repair. Legitimate credit repair takes time and effort. For reputable options, see our best credit repair companies comparison.
• Not saving enough for closing costs: In addition to your down payment, you’ll need to cover closing costs, which can be a significant expense. Not having enough saved can derail your purchase at the last minute.
• Overestimating what you can afford: Just because you qualify for a certain loan amount doesn’t mean it’s wise to borrow that much. Make sure your monthly payment fits comfortably within your budget.

Mistake Example:

Suppose you’re pre-approved for a mortgage, but then you finance a new car before closing. This increases your DTI and could cause your lender to revoke your approval. Always avoid major financial changes until after your mortgage closes.

Avoiding these mistakes can save you money and stress during the mortgage process. Take your time, do your research, and don’t rush into a loan you’re not ready for.

Even if you have a low credit score, you can take steps to strengthen your application:

• Pay down existing debts: Lowering your credit utilization can boost your score quickly. Focus on paying off credit cards and other revolving debt first.
• Dispute inaccuracies: Use your rights under the FCRA to correct errors on your credit report. Disputing even one inaccurate late payment can make a difference.
• Save for a larger down payment: The more you put down, the less risky you appear to lenders. A larger down payment can also help you avoid private mortgage insurance (PMI) and reduce your monthly payment.
• Gather documentation: Be ready to prove your income, assets, and employment history. Having all your paperwork in order speeds up the process and reassures lenders.
• Consider a co-signer: A co-signer with good credit can help you qualify, but both parties are equally responsible for the loan. Make sure your co-signer understands the risks.
• Build a positive payment history: If you have time before applying, make all your payments on time for at least six months. Even a short period of on-time payments can help.
• Avoid new credit inquiries: Each new application for credit can lower your score slightly. Hold off on applying for new credit cards or loans until after your mortgage closes.
• Use alternative credit data: Some lenders will consider alternative data, like on-time rent or utility payments, especially for FHA loans. Ask your lender if they accept this information.

Next Steps:

If you’re not in a rush, take a few months to work on your credit before applying. Even a small increase in your score can make a big difference in your loan terms. For example, raising your score from 580 to 620 could mean better loan options and requirements.

Resources:

• Use free credit monitoring tools to track your progress.
• Consult a HUD-approved housing counselor for personalized advice.
• Explore our credit repair resources for step-by-step guides.

Improving your credit is a marathon, not a sprint. But even small steps can pay off when it’s time to apply for a mortgage.

If you’re approved for a mortgage with a low credit score, be prepared for higher monthly payments and stricter loan terms. You may also be required to pay for private mortgage insurance (PMI) if your down payment is less than 20%.

After closing:

• Make all payments on time—late payments can further damage your credit and put your home at risk of foreclosure.
• Consider refinancing in the future if your score improves. This could lower your interest rate and monthly payment. Many homeowners refinance after a year or two of on-time payments and improved credit.
• Monitor your credit regularly to track your progress. Use free tools or sign up for alerts from the credit bureaus.
• Build an emergency fund. Unexpected expenses can happen, and having savings can help you avoid missed payments.
• Review your mortgage statement each month to ensure your payments are being applied correctly.

Long-Term Strategies:

• Keep working on your credit. The better your score, the more options you’ll have for future loans, credit cards, and even job opportunities.
• Set up automatic payments to avoid missing due dates.
• If you encounter financial hardship, contact your lender immediately. Many lenders offer forbearance or modification programs, especially if you act early.

Refinancing Example:

Suppose you buy a home with a higher interest rate due to a low credit score. After two years of on-time payments and credit improvement, you refinance at a lower rate. This could save you money each month and over the life of your loan.

Avoiding Foreclosure:

Missing mortgage payments can quickly lead to foreclosure, especially if your credit is already weak. If you’re struggling, seek help from a HUD-approved housing counselor or your lender’s loss mitigation department.

For more guidance on improving your credit and preparing for future financial goals, explore our credit repair resources. Homeownership is a journey—keep learning, stay proactive, and protect your investment.