Bad-credit mortgages: the score floors, and what low credit costs
A low credit score does not lock you out of homeownership — FHA loans approve scores down to 580 with 3.5% down, and 500 with 10% down. What a low score changes is the price: a weaker credit tier can add a point or more to your rate, which compounds into tens of thousands over 30 years.
The loan type sets the floor. FHA loans are the most forgiving — 580 with 3.5% down, or 500 with 10% down — which makes them the standard path for buyers with damaged credit. Conventional loans generally want 620 and price best at 740+. VA loans have no VA-set minimum, though lenders usually look for around 580. If you qualify for VA, it is the strongest option at any credit level.
What low credit really costs is the rate. Mortgage pricing improves in tiers, and dropping a tier can add a point or more to your rate — on a $300,000 loan, that is roughly $180 a month and well over $60,000 across the life of the loan. With FHA, a sub-620 score also means mortgage insurance you cannot cancel without refinancing, adding to the monthly cost.
That makes a bad-credit mortgage a strategic starting point, not a destination. Get in with FHA now if the payment works, then improve your credit and refinance to conventional to drop the insurance and the rate. Before you commit, pull your report, fix errors, and pay down card balances — even a small score bump can move you up a pricing tier. Model the payment in the mortgage calculator.
Questions people ask
What credit score do I need to buy a house?
As low as 500 through FHA with 10% down, or 580 with 3.5% down. Conventional loans generally want 620, and VA loans have no set minimum though lenders often look for around 580. The lower your score, the higher your rate.
How much does bad credit cost on a mortgage?
Dropping a credit-pricing tier can add a point or more to your rate — roughly $180 a month and over $60,000 across 30 years on a $300,000 loan. Improving your score before applying is often the highest-return step you can take.
Can I refinance out of a bad-credit mortgage later?
Yes, and it is often the plan — buy with FHA now, then refinance to a conventional loan once your credit and equity improve to drop the mortgage insurance and lower the rate. FHA loans are common refinance candidates for exactly this reason.
How do I improve my mortgage terms with low credit?
Pull your credit report and fix errors, pay down credit-card balances to lower utilization, avoid new debt before applying, and save a larger down payment. Each can nudge you into a better pricing tier and cut your rate.