Yes, you can buy a house with poor credit. People with FICO scores in the 500s close on homes every month, and they don’t all pay cash or borrow from a parent. But the honest version of that answer is this: a low score doesn’t stop you from buying. It changes which loan you qualify for, how much you put down, and what the money costs you over 30 years.
Here’s what those trade-offs actually look like, with numbers.
What Lenders Mean When They Say “Poor Credit”
There’s no single definition. A 640 is poor to a jumbo lender and perfectly workable to an FHA lender. The score bands that matter in mortgage underwriting look roughly like this:
- 760 and up: best available pricing, easiest approval, most lenders compete for you.
- 700 to 759: still strong. Minor rate bump, usually none at all.
- 660 to 699: conventional loans stay open. You’ll pay a bit more in loan-level price adjustments.
- 620 to 659: the FHA zone. Conventional gets harder and more expensive.
- 580 to 619: FHA with 3.5% down is still on the table. Conventional is mostly out.
- 500 to 579: FHA is possible but requires 10% down. Options narrow sharply below 500.
One more thing lenders look at besides the score: what’s actually in the file. A 610 built from a couple of old medical collections reads very differently to an underwriter than a 610 built from two recent mortgage lates.
The Loan Programs That Actually Say Yes
FHA: the workhorse for lower scores
FHA is where most poor-credit buyers end up, and for good reason. With a 580 score you can put down 3.5%. Between 500 and 579, the down payment requirement jumps to 10%. Below 500, FHA is technically available but almost no lender will touch it without compensating factors that are hard to manufacture.
FHA also allows debt-to-income ratios up to around 50% with automated approval, sometimes higher with manual underwriting. That flexibility is the reason it exists.
VA and USDA
VA doesn’t set its own minimum score, but individual lenders do, and most land at 620 with a few going to 580. USDA is similar: many lenders want 640, some will go to 581. Both offer zero-down options, which is enormous if saving cash is your bigger obstacle than your credit.
Conventional
Fannie Mae and Freddie Mac require a 620 minimum. First-time buyers can put down as little as 3%. If your score is above 620 but your down payment is thin, this is often cheaper than FHA once you factor in mortgage insurance that eventually drops off.
When banks say no
Seller financing, lease-to-own arrangements, non-QM lenders, and adding a creditworthy co-borrower all exist as fallbacks. They come with real costs and real risks, which is why the honest playbook for buying with bad credit is worth reading before you sign anything unusual.
Debt-to-Income Often Matters More Than Your Score
A 590 score with a 38% DTI is a much easier approval than a 660 with a 49% DTI. Lenders are asking one question: after the mortgage, taxes, insurance, and your existing debts, is there anything left?
Quick math. If you gross $6,000 a month and carry a $420 car payment and $150 in minimum card payments, you have $570 in non-housing debt. An FHA loan at 50% DTI allows $3,000 total, so roughly $2,430 can go to housing. At current rates and a 3.5% down payment, that supports a purchase somewhere around $310,000 to $330,000 depending on taxes and insurance. Run your own version rather than borrowing mine: how much house you can really afford walks through it in about 20 minutes.
What Poor Credit Actually Costs You
This is the part people skip. On a $280,000 loan, the difference between a 6.75% rate and an 8.0% rate is about $240 a month. Over 30 years that’s roughly $86,000 in extra interest. Add FHA mortgage insurance at 0.55% annually, around $128 a month on that loan, and you’re staring at real money.
There’s an upfront FHA premium too: 1.75% of the loan, which is $4,900 on a $280,000 loan and usually gets rolled into the balance. Budget for closing costs on top of that, typically 2% to 5% of the purchase price. The 20 expenses every buyer should budget for covers the ones that surprise people, including the ones that show up after closing.
What You Can Realistically Fix in 60 to 90 Days
You can’t erase a foreclosure in three months. You can move a score 30 to 50 points, which sometimes flips you from a 10% down requirement to 3.5%.
- Get utilization under 10%. Not 30%. Paying a card down mid-cycle, before the statement cuts, is the fastest single lever most people have.
- Handle collections intelligently. Paid collections don’t disappear from your report, and paying an old one can sometimes refresh its date. Ask for a pay-for-delete in writing, or leave small ones alone if your lender’s underwriter will accept an explanation.
- Don’t close accounts. Closing a card lowers your available credit and raises utilization.
- Avoid new credit. A car loan three weeks before closing can kill the deal at final verification.
- Ask about a rapid rescore. Your loan officer can submit documented corrections and get results in days, not months.
Cash and Reserves Still Carry Weight
Poor credit plus zero savings is a hard no almost everywhere. Poor credit plus 10% down and three months of reserves is a conversation. A larger down payment reduces the lender’s exposure, and a bigger cushion reduces the odds you miss a payment in year two.
How much should you set aside beyond the down payment? Six months of mortgage payments plus closing costs plus a $4,000 to $8,000 repair fund is a sane target. The 7-step savings plan with real numbers breaks it into monthly targets you can actually hit.
A Realistic Scenario
A $265,000 house. Buyer has a 604 score, $18,000 saved, and $310 in monthly debt payments against $5,400 gross income. FHA at 3.5% down means $9,275 down plus roughly $8,000 in closing costs and prepaid items, leaving about $700 in reserves. That’s tight. The loan officer might push for a slightly cheaper house, a seller credit toward closing costs, or two more months of saving.
Same buyer with a 578 score gets a different answer: 10% down, or $26,500, which they don’t have. That’s the entire argument for spending 60 days on utilization before applying.
Mistakes That Sink Low-Credit Buyers
The most common one is applying before the file is ready. A denial creates a record and burns a hard inquiry. Get your three credit reports, dispute genuine errors, pay down revolving balances, then get pre-approved once.
The second is falling for a listing before knowing the number. The third is draining every dollar into the down payment, then discovering the furnace is 22 years old. A longer list lives in 25 costly home buying mistakes, and most of them cost more than the rate difference that poor-credit buyers spend weeks worrying about.
Three Phone Calls to Make This Week
Call two FHA-approved lenders and one mortgage broker. Ask each the same three questions: what score do you need for 3.5% down, what DTI will you approve up to, and will you do a manual underwrite if the automated system declines me? The answers vary more than you’d expect, and the difference between lenders on the same borrower can be half a point in rate and thousands in fees.
Then ask what would need to change for a better tier. A good loan officer will name two or three specific items and a timeline. A bad one will tell you to call back in a year. The first kind is worth the phone call.