How to Qualify for a Mortgage with a Low Credit Score

Learn how to qualify for a mortgage with a low credit score in the US. Explore loan options, approval tips, and strategies to improve your credit and buy a home.

Buying a home is one of the biggest financial milestones in life—but for many Americans, a low credit score can feel like an impossible barrier. Lenders use credit scores to gauge your ability to repay loans, and when that number is less than ideal, securing a mortgage often becomes challenging. Still, a low score doesn’t mean your dream of homeownership is out of reach. With the right preparation, loan type, and financial strategy, you can qualify for a mortgage even if your credit history isn’t perfect.

In today’s housing market, millions of Americans face similar challenges. According to Experian, the average FICO credit score in the U.S. is around 715, yet many first-time buyers fall below that threshold. Economic hardships, student loans, and unexpected medical expenses can all weigh on your credit, but lenders now offer programs designed to help buyers with less-than-stellar scores. The key is understanding how mortgage approvals work and what steps you can take to improve your chances of qualifying.

Understanding Credit Scores and Mortgage Requirements

Before diving into solutions, it’s important to know what your credit score represents and how it affects your mortgage eligibility. Most lenders in the U.S. rely on the FICO scoring model, which ranges from 300 to 850. Generally, a score of 740 or higher is considered excellent, 670–739 is good, 580–669 is fair, and anything below 580 is poor. The lower your score, the higher the perceived risk to lenders—and the more you’ll pay in interest, if approved.

Different mortgage programs have different credit requirements. Conventional loans, backed by Fannie Mae or Freddie Mac, typically require a minimum credit score of around 620. Borrowers with higher scores often receive lower interest rates and better terms. However, FHA loans, insured by the Federal Housing Administration, are much more flexible—allowing approvals for scores as low as 500, provided the borrower can meet specific conditions such as a larger down payment.

For veterans and active military members, VA loans backed by the Department of Veterans Affairs don’t have an official minimum credit score, though most lenders prefer at least 580–620. Similarly, USDA loans, designed for rural and suburban homebuyers, can approve borrowers with scores around 640.

Your credit score isn’t the only factor lenders consider. They also evaluate your debt-to-income (DTI) ratio, employment history, and savings. This means that even with a low score, strong income stability or a larger down payment can offset some risk and strengthen your application.

Steps to Improve Your Chances of Mortgage Approval

If your credit score is less than ideal, don’t panic—there are several actionable steps you can take to boost your odds of approval. The first step is to check your credit report for errors. You’re entitled to a free copy of your report annually from each of the three major bureaus—Experian, Equifax, and TransUnion—through AnnualCreditReport.com. Mistakes like outdated accounts or incorrect late payments can drag your score down unnecessarily, and disputing them can result in an immediate improvement.

Next, focus on reducing your credit utilization ratio—the amount of available credit you’re using. Experts recommend keeping this under 30%, and ideally under 10%, to show lenders you manage credit responsibly. Paying down high-interest credit cards or asking for a credit limit increase (without taking on new debt) can help lower this ratio quickly.

Another crucial step is to make all payments on time. Payment history makes up about 35% of your credit score, so even a few months of consistent, on-time payments can make a measurable difference. Setting up automatic payments or reminders can help you stay consistent.

If you’re planning to apply for a mortgage within the next few months, avoid taking on new credit. Each application results in a “hard inquiry,” which can slightly lower your score. It also signals to lenders that you may be increasing your financial risk. Instead, focus on demonstrating stability and maintaining your current accounts in good standing.

Finally, build a stronger financial profile overall. Saving for a larger down payment—ideally 10% to 20%—can make you a more attractive borrower. It shows lenders that you’re committed and provides a cushion in case of missed payments. Additionally, lowering your debt-to-income ratio by paying off loans or consolidating debt can further improve your approval chances.

Exploring Mortgage Programs for Low Credit Borrowers

Even if your credit score remains low, several government-backed loan programs make homeownership possible. The most common is the FHA loan, which caters specifically to borrowers with weaker credit. If your score is between 500 and 579, you can still qualify by putting down at least 10%. If your score is 580 or higher, the required down payment drops to just 3.5%. FHA loans also have more flexible DTI limits and allow for the use of gift funds to cover down payments.

For veterans, VA loans are among the best options available. They offer zero down payment, no private mortgage insurance (PMI), and competitive interest rates—even for borrowers with credit challenges. The VA doesn’t set a minimum score requirement, though lenders typically prefer applicants above 580. The program also considers compensating factors, such as strong income or a stable employment record, when evaluating applicants with lower scores.

USDA loans, backed by the U.S. Department of Agriculture, are designed for moderate-income buyers in rural and some suburban areas. These loans require no down payment and offer favorable terms, but borrowers generally need a score of at least 640 for streamlined processing.

For those who don’t qualify for government programs, non-qualified mortgages (non-QM) and subprime loans may be alternatives. These loans cater to borrowers with unique financial situations, such as self-employed individuals or those with recent credit issues. However, they often come with higher interest rates and fees, so it’s essential to review terms carefully and ensure affordability.

Long-Term Strategies to Strengthen Your Financial Position

While it’s possible to buy a home with a low credit score, improving your financial foundation pays off in the long run. A higher score can qualify you for better mortgage rates, saving tens of thousands of dollars over the life of the loan. Take time to build credit gradually—keep old accounts open, make small purchases, and pay them off each month to establish a consistent record of responsible use.

You should also avoid maxing out your budget when buying a home. Just because you qualify for a certain loan amount doesn’t mean you should borrow the maximum. Choose a property that fits comfortably within your income range, leaving room for emergencies, maintenance, and other expenses.

Finally, stay proactive. Continue monitoring your credit, revisit your financial goals annually, and consider working with a HUD-approved housing counselor. These professionals can help you create a plan tailored to your situation and connect you with local or state-level down payment assistance programs.

Remember, credit scores are not permanent—they’re snapshots of your financial behavior. With consistent effort and informed decisions, you can improve your score and open the door to better opportunities in the future.