How do you buy a house with bad credit?

Buying a home with bad credit is possible through FHA loans (minimum 500 FICO with 10% down; 580 for 3.5% down), VA and USDA programs with more flexible standards, or by taking time to improve your score before applying. Lower credit typically means higher rates and costs.

A credit score below 620 closes most conventional loan doors, but several federal programs exist specifically for borrowers who don't meet conventional credit standards. Understanding which program fits your situation â and what it actually costs â is the starting point.

Federal loan programs with flexible credit standards

FHA loans: insured by the Federal Housing Administration, FHA loans accept scores as low as 500 (with 10% down) or 580 (with 3.5% down). They require mortgage insurance for the life of the loan on most originations after June 2013 with under 10% down, which adds to monthly cost.
VA loans: available to eligible veterans, active-duty service members, and surviving spouses with VA entitlement. VA loans have no official minimum credit score set by the VA itself â individual lenders set their own overlays, often 580-620. No down payment is required and there is no monthly mortgage insurance.
USDA loans: for properties in eligible rural and suburban areas, USDA loans also have no down payment requirement. Lenders typically look for a 640 score, though the USDA itself does not mandate a specific minimum.
Conventional loans: generally require a minimum 620 score. Below that threshold, expect significantly limited options and higher costs.

What lower credit actually costs you

Lenders price risk through interest rates. A borrower with a 580 FICO score will receive a meaningfully higher rate than one with a 740 score on the same loan â the difference can translate to tens of thousands of dollars in additional interest over a 30-year term. For FHA loans, the mortgage insurance premium (MIP) adds both an upfront cost (currently 1.75% of the loan amount) and an annual premium of roughly 0.55%-1.05% depending on loan size and term, rolled into the monthly payment. The CFPB's mortgage explorer tool lets you see how credit scores affect rates across loan types.

Improving your credit before applying

If you're not locked into a purchase timeline, improving your credit score before applying can save a substantial amount. Paying down revolving balances to below 30% of each card's credit limit, correcting errors on your credit report (which you can dispute free through each bureau), making all payments on time for 6-12 months, and avoiding new credit accounts are the highest-impact steps. The CFPB's credit report guide explains how to pull and dispute your report at no cost.

What federal programs say about credit requirements

FHA loans allow a minimum credit score of 500 with a 10% down payment, or 580 with a 3.5% down payment, making them one of the most accessible mortgage programs for borrowers with damaged credit. — HUD
The VA does not set a minimum credit score for VA-guaranteed home loans; individual lenders establish their own credit overlays, which often range from 580 to 620. — CFPB
Consumers can pull their credit reports free from all three bureaus at AnnualCreditReport.com and dispute inaccurate information under the Fair Credit Reporting Act. — CFPB

Key takeaways

FHA loans accept scores as low as 500 (10% down) or 580 (3.5% down) â the primary conventional path for bad-credit homebuyers.
VA loans (for eligible veterans and service members) and USDA loans (rural areas) have no official minimum score and no down payment requirement.
Lower credit scores result in higher interest rates â the difference is significant over a 30-year term.
FHA loans require mortgage insurance for the life of most loans, adding to the monthly cost.
Improving your credit before applying â even by 40-60 points â can meaningfully lower your rate and total cost.