Bad credit doesn’t shut you out of a mortgage. It raises the price of one. That’s the short version, and it’s worth sitting with for a moment, because plenty of buyers hear “bad credit” and assume they need two years of quiet, disciplined rebuilding before anyone will talk to them. Some do. Many don’t.
What actually happens at the lender’s desk is simpler than it sounds. Your credit score is treated as a probability, a guess about how likely you are to miss payments. A low score means a bigger guess, so the lender charges more, either through a higher interest rate, a larger upfront fee, or both. The gap between a strong rate and a weak one is not a rounding error. On a $250,000 loan, one percentage point of difference runs about $168 a month. Stretch that across 30 years and you’re near $60,000.
So the real question isn’t “can I get a mortgage with bad credit?” It’s “what will it cost me, which programs will take me today, and what can I change in the next 60 days?”
How Bad Credit Actually Changes Your Rate
Lenders don’t look at your score and shrug. They apply loan-level price adjustments, usually shortened to LLPAs, which are add-ons to your rate or your discount points based on your score and down payment together. A borrower at 760 with 20% down triggers almost none of them. A borrower at 605 putting 5% down can stack several at once. That’s how two people get quotes a full point and a half apart on the same Tuesday at the same bank.
Scores are grouped into buckets, not treated as a smooth number. Crossing from 619 to 620 can matter more than four years of on-time payments. It’s blunt, and it’s how the pricing sheets work.
The score buckets that move the needle
- 760 and above: best available pricing, no score-based adjustments.
- 700 to 759: small adjustments, usually a fraction of a point.
- 660 to 699: noticeable but manageable add-ons.
- 620 to 659: this is where it starts to sting, especially with a low down payment. Conventional loans still work, but pricing widens.
- 580 to 619: FHA territory. Most conventional lenders won’t touch this without a strong co-borrower.
- 500 to 579: FHA with 10% down, or non-prime lenders. Expect a real premium.
Ballpark Numbers for Borrowers in the 580 to 620 Range
Rates move weekly and vary by state, lender, and property, so treat the figures below as illustrations of the spread rather than quotes. They reflect the shape of the market, not today’s exact pricing.
- 620 score, FHA, 3.5% down: often lands in the mid-6% to low-7% range, but with mortgage insurance on top.
- 620 score, conventional, 20% down: roughly a quarter to three-quarters of a point above what a 760 borrower would pay.
- 580 score, FHA, 10% down: commonly high-7% to mid-8%.
- Below 560: mostly non-QM or portfolio lenders, and you’ll likely see 9% or more.
FHA deserves a footnote because the rate never tells the whole story. You pay a 1.75% upfront mortgage insurance premium that gets rolled into the loan, plus an annual premium of roughly 0.55% of the balance. On a $240,000 base loan, that annual premium alone is about $110 a month. FHA’s headline rate can look better than a conventional rate while costing you more each month. Compare total payment, not just rate.
Loan Programs That Tolerate Bruised Credit
Not every loan type treats a 590 the same way. Where you apply matters as much as what you score.
FHA loans
The most forgiving of the mainstream options. A 580 score gets you in with 3.5% down, and 500 to 579 is allowed with 10% down. Individual lenders often set their own floor at 600 or 620, so shop a few.
VA loans
The VA itself doesn’t publish a minimum score, but most lenders layer on a 580 to 620 requirement anyway. There’s no monthly mortgage insurance, only a one-time funding fee, which is a genuine advantage if you qualify.
USDA loans
For eligible rural and some suburban addresses. Typical minimum is 640, occasionally 600 through specific lenders. Also no monthly mortgage insurance, though there’s an annual fee.
Conventional with a co-borrower
Some conventional programs accept a non-occupant co-borrower whose stronger credit and income carry the file. Lenders price using the lowest mid-score on the application, so a parent or relative at 780 can pull your pricing down dramatically.
Non-QM and portfolio lenders
Banks that hold loans on their own books make their own rules. Some will approve you based on 12 months of cancelled rent or utility payments instead of a score. Flexible, fast, and expensive. Useful when you need to buy now and refinance later.
What Moves Your Rate Besides Your FICO Score
Credit score is the loudest factor, not the only one. Several others can swing your payment further than 20 points on your score will.
- Down payment size. Going from 5% to 20% does two things at once: it cuts the score-based adjustments and removes mortgage insurance. On a $250,000 home, eliminating a 0.85% annual MI premium saves about $177 a month by itself.
- Debt-to-income ratio. Under 43% keeps you in the friendly zone. Between 43% and 50% you’re relying on compensating factors like reserves or a long employment history.
- Cash reserves. Two to six months of payments in the bank won’t lower your rate directly, but it can rescue an approval that’s borderline on other measures.
- Discount points. One point costs 1% of the loan amount and typically buys about 0.25% off the rate. Whether that’s worth it depends on how long you’ll keep the loan.
- Lender overlays. Agency rules are the floor, not the ceiling. One lender’s minimum is 580, another’s is 640 for the same FHA product.
If this is your first purchase, the interaction between rate, mortgage insurance, and down payment is where the real money hides. This breakdown of what really moves your monthly payment for first-time buyers is a useful companion to the numbers above.
Locking In When You’re Already Paying a Premium
A lock decision feels heavier when your rate sits at 7.75% instead of 6.5%. Every eighth of a point is real money. Two things are worth understanding before you commit.
First, your quoted rate is not frozen just because you were quoted it. Rates float between application and closing unless you lock, and a jump in the middle of underwriting can change your numbers right before you sign. Here’s a plain explanation of how mortgage rates can change before closing and what triggers it.
Second, nobody can time the bottom reliably. Waiting for the perfect week usually costs more than locking on a decent day. The more practical approach is deciding how long a lock you need, and whether an extension is cheaper than a float-down. This piece on when to lock a mortgage rate frames the decision around your closing date rather than the market’s mood.
Locks aren’t free either, and the pricing isn’t always obvious. A 60-day lock might cost nothing while a 90-day lock adds a quarter point, and extensions are often charged in increments. Before you commit, it’s worth knowing what a rate lock actually costs so you’re not surprised at the closing table.
What You Can Realistically Fix Before Closing
Two months is not enough time to erase a bankruptcy. It is enough to move a score 20 to 40 points, which can be the difference between a 620 and a 640 pricing tier, or a conventional approval instead of FHA.
- Credit utilization: the fastest lever. Dropping a card from 80% used to under 10% can reflect in one billing cycle, roughly 30 days.
- Rapid rescore: your loan officer can request it with documentation, and it usually updates within three to five business days.
- Disputes: errors take about 30 days to resolve. Worth doing, but start early.
- New accounts: don’t. Financing a car or opening a store card before closing is the classic way to blow up an approval.
- Authorized user status: being added to a relative’s old, low-balance card can lift a thin file, though some lenders disregard it.
Ask your loan officer which specific items on your report matter to their underwriting. Requirements vary. Medical collections under a certain threshold are ignored by many lenders, while a single 30-day late payment from four months ago can sink you.
Questions Worth Asking Every Lender
- What’s the lowest score you’ll approve at, and what’s your minimum down payment for that score?
- Are you pricing this with FHA or conventional, and what’s the total monthly payment for each?
- How many discount points are baked into this quote?
- How long is the lock, and what does an extension cost if closing slips?
- Do you offer any first-time buyer or down payment assistance programs?
Get two or three of these conversations going in the same week so the quotes are actually comparable. Ask for a Loan Estimate from each, look at page two, and compare the total monthly payment and the total closing costs side by side rather than the interest rate alone. A loan at 7.5% with no points can beat a 7.25% loan with two points if you plan to sell or refinance within a few years. The right answer depends on your timeline, your cash, and how quickly you expect your credit to improve, so decide those three things before you sign anything.