Can You Buy a House With Bad Credit? Yes, Here Is the Cost

Yes, you can buy a house with bad credit, and the doors are wider than most people think. FHA loans accept scores as low as 580 with 3.5% down, and as low as 500 with 10% down. VA loans have no minimum score set by the Department of Veterans Affairs. USDA loans reach rural buyers with credit in the low 600s. The honest question is not whether you can, but what it costs you to do it, because a low score means a higher rate, mandatory mortgage insurance, and often a smaller house than you could afford a year later. For many buyers the smartest move is to spend six to twelve months repairing the score and buy at a fraction of the lifetime cost. Here is the full picture for 2026.

The Credit Minimums, Loan by Loan

Different programs draw very different floors for your credit score. This table is where the "can I or can't I" question gets its answer.

Loan type	Minimum credit	Down payment	Mortgage insurance	Best fit
FHA	580 for 3.5% down, 500 for 10% down	3.5% to 10%	Upfront plus annual premium	First-time buyers, low scores
Conventional	620 at most lenders	As low as 3%	PMI until you reach 20% equity	Good scores, lowest rates
VA	No VA-set minimum	0%	No monthly insurance, funding fee applies	Veterans, active duty, eligible spouses
USDA	Around 640, lender dependent	0%	Upfront plus annual guarantee fee	Rural buyers

The FHA loan is the headline answer to the question. A score of 500 still qualifies with a 10% down payment, and 580 unlocks the 3.5% option. That is a genuinely low bar, and it is why FHA is the first stop for most buyers with damaged credit. The catch is that FHA's generosity is priced into the loan: an upfront mortgage insurance premium plus an annual premium that, on most loans with less than 10% down, lasts for the life of the loan.

For veterans, a VA loan is the single best path in the entire credit spectrum. There is no VA-set minimum score, no down payment, and no monthly mortgage insurance. Individual lenders set their own floors, typically in the 580 to 620 range, but the program itself is the most forgiving door to homeownership that exists. The mortgage insurance mechanics across all four programs are covered in detail in our mortgage insurance guide.

What Bad Credit Actually Costs You

Here is the uncomfortable math. The same $300,000 house can cost two completely different amounts of money depending on which band your score lands in, because the interest rate spread between fair credit and good credit is real and compounding.

Credit band	Typical rate impact on a 30-year loan	Extra cost on $300,000 over 30 years
740 and up	Baseline best pricing	$0
670-739	Slightly higher	Tens of thousands
620-669	Meaningfully higher	$50,000 range
580-619, often FHA	1 to 2 points higher	$60,000 to $120,000

A worked example makes it concrete. Take a $300,000, 30-year fixed loan. At 6.5%, the monthly payment is about $1,896 and the total interest over 30 years is roughly $382,000. At 7.5%, the payment is about $2,098 and total interest is roughly $455,000. That single point of rate is about $200 a month and roughly $73,000 over the life of the loan, before you count the extra mortgage insurance, before you count the higher insurance premiums that travel with a lower score, and before you count the closing costs. The mortgage vs invest calculator will show you what that monthly difference does to your long-term net worth either way.

That is the real reason the financial answer to "can I buy a house with bad credit?" is more complicated than "yes." You can, and millions of people do, but you pay a premium measured in tens of thousands of dollars for the privilege. The question you should be answering is whether that premium is worth the year of waiting.

The Smarter Path: Raise Your Score Before You Apply

Raising a credit score 60 to 100 points typically takes six to twelve months of consistent behavior, and the payoff is measured in tens of thousands of dollars. The fixes that move the needle fastest are the boring ones.

Pay down credit card balances. Utilization is roughly 30% of a FICO score. Dropping from 60% utilization to under 30% often produces a double-digit point jump within a couple of billing cycles, because utilization is recalculated whenever your cards report.
Fix errors on your reports. Pull all three reports free at annualcreditreport.com and dispute anything inaccurate. The process is free, and removing a wrong item is one of the few quick wins available. Our how to remove collections from your credit report guide walks through the full dispute process.
Never miss a payment. Payment history is the single heaviest factor. One 30-day late can undo months of progress, and the mark stays on the report for seven years.
Pay down debt rather than opening new credit. Lenders weigh your debt-to-income ratio as heavily as your score. Shrinking car loans and card balances moves that number more than anything you can do to the score overnight, and the debt snowball method is the fastest way to shrink them.

While you wait, keep your down payment working in a high-yield account, and build the reserves lenders want to see after closing. Homeownership will test your savings account within the first year, and our emergency fund guide is the right prerequisite reading.

If You Buy Anyway: The Workarounds

Not everyone can wait a year, and some people's "bad credit" is really a thin file rather than a history of missed payments. If you are going to buy now, these levers soften the blow.

FHA at 580 with 3.5% down. The most accessible door for genuinely low scores, and the starting point for most buyers in this situation.
A co-signer or co-borrower with strong credit. Their credit joins the application, so the loan can price off the better score. They are equally on the hook for the debt, so this only works with full trust on both sides.
A larger down payment. On FHA, 10% down unlocks the 500-score path. On conventional loans, more down means less mortgage insurance and a better rate tier.
A smaller or more modest house. A house that fits your credit profile and monthly budget beats one you cannot comfortably afford at a bad rate. A $250,000 house at a good score beats a $400,000 house at a punishing rate.
Shopping lenders hard. Subprime lenders exist and will take the loan, but the fee structures are often worse than the rate suggests. Compare Loan Estimates from several lenders before committing to any.

What Lenders Look At Besides Your Score

The credit score is the headline number, but lenders underwrite the whole borrower. These are the factors you can improve even while your score is stuck.

Debt-to-income ratio. Lenders generally want your total monthly debt payments, including the new mortgage, under about 43% of your gross income, and they prefer lower. A 620 score with a 30% DTI gets approved more often than a 720 with a 55% DTI, because the high DTI is the risk that actually breaks the deal.
Down payment and reserves. More money down means more equity and less risk to the lender. Most want to see a few months of mortgage payments left in your accounts after closing.
Employment history. Two years of steady, verifiable income is the standard ask. A job held for a year reads far better than a recent string of short gigs.
The house itself. The appraisal and condition of the property matter as much as your credit. Lenders will stretch further for a modest, well-priced house than for a premium property.

That is why pre-approval comes before house shopping, not after. A pre-approval tells you which programs are realistic at your score and what price range you actually qualify for. Get pre-approvals from two or three lenders, including an FHA specialist and a local credit union, and compare the Loan Estimates line by line.

Common Mistakes When Buying With Bad Credit

Buying at the top of your approved amount. Lenders approve you for more than you can comfortably pay, and at a bad rate the margin for error is thin. Buy below the approval ceiling, not at it.
Ignoring the mortgage insurance bill. FHA loans with less than 10% down carry annual mortgage insurance for the life of the loan in most cases. It is not a temporary cost you can cancel at 20% equity the way conventional PMI works.
Falling for subprime fee stacking. Low advertised rates on bad-credit loans are often offset by origination fees, points, and prepayment penalties. Compare APR and total closing costs, not just the rate.
Applying everywhere at once. Every application is a hard inquiry, and several in a short window can push your score down further. Pick your lenders, apply within a two-week window so the inquiries group, and stop.
Quitting the credit repair after closing. The year of work that got you approved is worth continuing, because refinancing out of a bad rate becomes available once your score climbs.

FAQ

Can you really buy a house with a 500 credit score? Yes, but only through an FHA loan with a 10% down payment. The 500 path does not exist on conventional, VA, or USDA loans.

What is the lowest credit score for an FHA loan? 500 with 10% down, or 580 with 3.5% down. Scores below 500 will not qualify for FHA.

Is VA or FHA better for bad credit? VA for anyone eligible: no down payment, no monthly mortgage insurance, and no VA-set minimum score. FHA is the fallback for everyone else.

How much more does a bad credit mortgage cost? One point of rate on a $300,000, 30-year loan is roughly $200 a month and around $73,000 in interest. Bad credit can cost 1 to 2 points plus lifetime mortgage insurance.

How long does it take to raise a credit score enough to buy? Six to twelve months is realistic for a 60 to 100 point improvement, which is usually enough to move from FHA pricing to conventional pricing.

Can I use a co-signer to buy a house with bad credit? Yes. A co-borrower with strong credit lets the application price off the better score, and they take equal responsibility for the debt.

The Bottom Line

Can you buy a house with bad credit? Yes. FHA accepts scores as low as 500, VA has no minimum, and USDA reaches rural buyers in the low 600s. But the cost is real: a 1 to 2 point rate premium plus mortgage insurance can add $60,000 to $120,000 to a 30-year loan compared with waiting a year to repair the score. For most borrowers the smarter move is to spend six to twelve months paying down balances, fixing errors, and building history, then buy on a conventional or VA loan at a fraction of the lifetime cost. Homeownership is a marathon, and the money you save by waiting is money that can fund your FIRE number instead of your interest bill.

Related Calculators

Sources

This article is for educational purposes only and is not financial advice. Consult a qualified professional before making financial decisions.