Bad credit doesn't mean you can't buy a home — it means you need the right loan program, the right lender, and the right strategy. Millions of Americans buy homes every year with credit scores below 620. This guide covers every loan program available for bad credit buyers, the minimum scores for each, and the fastest path from where you are now to closing day.
Minimum credit score for FHA loans — the most accessible bad credit mortgage
Down payment required for USDA and VA loans — two zero-down options
Minimum time to improve your credit score enough to access better mortgage rates
Americans with credit scores below 670 — homeownership is still achievable
| Loan Type | Min Score | Down Payment | Mortgage Insurance | Income Limit |
|---|---|---|---|---|
| FHA (3.5% down) | 580 | 3.5% | Permanent MIP | None |
| FHA (10% down) | 500 | 10% | MIP 11 years | None |
| USDA | 580–640 | 0% | Guarantee fee | Yes — area limits |
| VA | 580–620 | 0% | None | None (veterans only) |
| Conventional | 620 | 3%–20% | Cancellable PMI | None |
| Hard Money / Portfolio | None required | 20%–40% | High rates | None |
If saving for a down payment is the obstacle, these programs can help — some provide grants (free money) while others provide low-interest second mortgages:
Every state has HUD-approved down payment assistance programs. Find them at hud.gov/states or call a HUD-approved housing counselor (free) at 1-800-569-4287.
Provides grants up to 5% of loan amount for down payment and closing costs. Works with FHA loans. Not repayment required. Check nhffunding.com for current availability.
50% discount on HUD homes for teachers, firefighters, EMTs, and law enforcement officers. Must commit to live in the home for 36 months. Managed by HUD — apply at hud.gov.
FHA allows your entire down payment to come from gift funds from family members. The gift must be documented with a gift letter and bank transfer records showing the money's source.
The math often favors waiting 6–12 months to improve your score. Here's why:
Waiting 12 months saves ~$152/month = $54,720 over 30 years. Plus the conventional PMI cancels — FHA MIP doesn't. But rising home prices may offset savings in high-appreciation markets. Calculate both paths with current local prices.
Get free reports at AnnualCreditReport.com. Know your score from all 3 bureaus — mortgage lenders use the middle score. Dispute any errors immediately.
500–579: FHA with 10% down. 580+: FHA with 3.5% down. Veteran: VA loan regardless of score. Rural area buyer: USDA at 580–640.
Down payment + closing costs (2%–6%) + 2–3 months reserves. On a $200,000 FHA loan: $7,000 down + $8,000 closing = $15,000 minimum cash needed.
Search "[your state] first time homebuyer assistance" or call HUD at 1-800-569-4287 for free housing counseling. Many programs are forgivable grants — free money.
Rate-shop within 45 days — counts as one inquiry. Compare APR (includes all fees) not just interest rate. Even 0.5% rate difference saves $30,000+ over 30 years.
Don't open new credit, don't finance a car, and don't change jobs between pre-approval and closing. Lenders re-check your credit before closing day.
FHA appraisals check property condition — not just value. Older homes may have issues (peeling paint, roof condition, safety hazards) that must be fixed before FHA approves.
If you use FHA, plan to refinance to conventional in 2–3 years once your score improves and you have 20% equity. Eliminating permanent MIP could save $100+/month.
FHA loans accept scores as low as 500 with 10% down — the lowest of any mainstream mortgage. USDA and VA loans typically require 580–640. Conventional loans require 620 minimum. For the best rates on any program, a score of 740+ is optimal.
Yes — FHA loans accept 580+ with just 3.5% down. USDA loans (rural areas) and VA loans (veterans) are also available at 580+ in most cases. You can buy a home at 580; the question is whether waiting to improve your score saves you enough money to justify delaying the purchase.
FHA requires 3.5% down with a 580+ score and 10% down with 500–579. VA and USDA loans require 0% down for eligible buyers. Down payment assistance programs can cover part or all of your down payment requirement in many states.
Pay down credit card balances to under 10% utilization (this has the fastest score impact — can improve 20–50 points within 30 days). Dispute any credit report errors. Don't close old accounts. Don't open new credit. Add yourself as authorized user on a family member's old account with good history.
Yes — FHA requires 2 years after Chapter 7 discharge (1 year with extenuating circumstances). USDA requires 3 years. VA requires 2 years. Conventional requires 4 years. The waiting period starts from the discharge date — not the filing date.
See your true monthly PITI — principal, interest, taxes, insurance, and MIP — before you start shopping for homes.
Mortgage Calculator →⚠ Disclaimer: Mortgage programs, rates, and requirements change. Verify current eligibility with a HUD-approved housing counselor (free at 1-800-569-4287). Not financial or legal advice. See our Disclaimer and Privacy Policy.