Having bad credit doesn’t automatically disqualify you from buying a home — but it does limit your options and increase your costs. Understanding which loan programs are available for lower credit scores and what steps to take to improve your situation can make homeownership achievable sooner than you think.
What credit score do you need to buy a house?
FHA loans: minimum 580 credit score with 3.5% down, or 500–579 with 10% down. VA loans: no official minimum (lenders typically want 620+). USDA loans: typically 640+. Conventional loans: minimum 620, but 700+ for the best rates. FHA loans are the most accessible path for buyers with damaged credit.
The real cost of buying with bad credit
A buyer with a 580 score might qualify for a mortgage — but at a significantly higher interest rate than a buyer with a 740 score. On a $250,000 loan, the difference between a 5.5% and a 7.5% rate is roughly $300/month — $108,000 over 30 years. Bad credit doesn’t just affect whether you can buy; it affects how much the home ultimately costs you.
Steps to improve your score before applying
Pay every bill on time for 6–12 months (payment history is 35% of your score). Pay down credit card balances below 30% utilization. Dispute any errors on your credit reports. Avoid opening new accounts in the 6 months before applying. Don’t close old accounts — length of history matters.
Consider waiting vs buying now
If your score is 580 today and you spend 12 months improving it to 680+, the lower interest rate could save you $50,000–$100,000 over the life of your loan. Running the math on waiting vs buying now is worth the 30 minutes — the answer varies significantly based on your specific situation and local market.