Thinking about buying a home but worried your credit isn’t quite up to par? You’re certainly not alone. A recent report from Bankrate, their 2025 Home Affordability Study, indicates that nearly a quarter of Americans who aren’t homeowners cite insufficient credit as a primary reason.
While your credit score is often the initial factor mortgage lenders consider when evaluating loan eligibility, it’s just one piece of the puzzle. Continue reading to discover how to secure the financing you need to purchase a house, even with less-than-perfect credit.
Securing a Mortgage with Less-Than-Perfect Credit
It’s possible to obtain a mortgage with a lower or less-than-ideal credit score, but you’ll need to prepare financially to ensure you lock in the most favorable loan terms. Your preparation should involve actively working to enhance your credit score before applying. This strategy will boost your approval prospects and position you best to secure a competitive interest rate. Here are some actionable steps:
- Review Your Credit Report for Discrepancies
Examining your credit report for inaccuracies can help pinpoint any items that might be negatively impacting your credit score. Several elements contribute to your credit score, including your payment history, the amounts owed on current credit, and the duration of your credit accounts. Your credit mix and recently opened credit accounts also play a role in your score. If you spot an error or an outdated entry related to any of these factors, reach out to Equifax, Experian, or TransUnion. Each credit bureau has established procedures for correcting errors and updating information.
- Reduce or Eliminate Existing Debt
When striving to buy a home with challenging credit, aim to reduce your existing financial obligations. Lowering your overall debt load could not only improve your credit score but also potentially qualify you for a larger mortgage, thanks to a more favorable debt-to-income (DTI) ratio.
- Explore Multiple Lenders
Every mortgage lender operates differently, and some offer more attractive rates and fees than others. Research indicates that obtaining multiple rate quotes can save you thousands over the life of a 30-year mortgage. Investigate various types of lenders, including traditional banks and online providers, to identify the most advantageous offer.
Learn more: Best Mortgage Lenders for Challenging Credit
- Consider a Co-signer
If your credit is weak, think about asking a family member or friend with a stronger credit profile to co-sign your mortgage. This can significantly bolster your application – but only if the co-signer is capable and willing to assume responsibility for the debt. (Note that co-signing differs from co-borrowing.)
- Be Wary of “Too-Good-To-Be-True” Offers
If you encounter advertisements promising “guaranteed” mortgage approval regardless of credit, consider it a red flag. Federal regulations mandate that lenders verify a borrower’s ability to repay a mortgage, so an absolute “guarantee” isn’t possible unless that verification occurs. Even if you receive such “guaranteed” approval, it typically comes with excessive or inflated costs.
- Explore a Rapid Rescore
Changes to your credit report can take time to process through the system, meaning improved scores might not appear in time for a mortgage application. In such instances, you can try pursuing a rapid rescore through your lender. During this process, your lender submits proof to a credit agency that an applicant has made recent account changes or updates not yet reflected on their credit report. This service usually incurs a fee, but the expense might be a worthwhile trade-off to secure a more favorable interest rate.
Types of Home Loans for Less-Than-Perfect Credit
| Loan Type | Credit Score Minimum |
| Conventional Loan | 620 or 660, depending on the specific program |
| FHA Loan | 580 (or 500 with a minimum 10 percent down payment) |
| VA Loan | No official requirement, typically 620 |
| USDA Loan | No official requirement, typically 640 |
Conventional Loans
Fannie Mae and Freddie Mac each support conventional loans with lower minimum credit scores of 620 and 660, respectively. Both of these loan types require as little as a 3 percent down payment and may offer either a fixed or adjustable interest rate. However, conventional mortgages can have stricter qualification criteria than other mortgage types, such as FHA or VA loans.
FHA Loans
The Federal Housing Administration (FHA) insures FHA loans, which permit mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment. While FHA loans feature more lenient qualifying standards, they come with mortgage insurance premiums (both upfront and annual) that you’ll be required to pay regardless of your down payment size.
VA Loans
If you are an active military member, a veteran, or married to someone who has served in the armed forces, you could benefit from a VA loan backed by the U.S. Department of Veterans Affairs. You are not required to meet a specific credit score minimum to qualify, though many lenders typically request a score of at least 620. No down payment is necessary with this loan, but you will need to pay the VA funding fee.
USDA Loans
If you have a lower income and intend to purchase a home in a specific rural area, consider a USDA loan. While not an absolute rule, most USDA-approved lenders generally require a minimum credit score of 640. Similar to VA loans, USDA loans do not have a down payment requirement.
How Mortgage Lenders Evaluate Credit
Lenders rely on data from the three primary credit reporting agencies: Equifax, Experian, and TransUnion. Typically, a lender uses the middle credit score among the three when considering your mortgage application. Beyond your scores, the lender will examine your full credit report, including your total debt obligations and any adverse events like defaults or late payments.
Mortgage lenders most frequently employ the FICO credit scoring model to assess creditworthiness. Here’s how those ratings are structured:
| Credit Score Range | Rating |
| Below 580 | Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| 800 or above | Excellent |
| Source: FICO |
Bankrate Insight
As of the fourth quarter of 2024, the average credit score for active mortgages in the U.S. stood at 741, according to the Federal Housing Finance Agency.
The Cost of a Lower Credit Score
A lower credit score will primarily result in a higher interest rate. Here’s an illustrative example assuming a 30-year conventional loan for $400,000:
| FICO Score | APR* | Monthly Payment | Total Interest Paid |
| 760-850 | 7.072% | $2,681 | $565,009 |
| 700-759 | 7.314% | $2,746 | $588,593 |
| 680-699 | 7.428% | $2,777 | $599,779 |
| 660-679 | 7.482% | $2,792 | $605,095 |
| 640-659 | 7.58% | $2,819 | $614,769 |
| 620-639 | 7.711% | $2,855 | $627,755 |
Do any of these options sound like a good starting point for your situation, or would you like to explore more about a specific loan type?