If your credit score is below 620, almost every mainstream mortgage article you read will tell you the same thing: rebuild your credit first then apply for a mortgage. That advice is well-intentioned but it’s also incomplete. The reality is that millions of homebuyers each year qualify for a mortgage with credit scores in the 500s and low 600s. The question isn’t whether you can get a mortgage with bad credit. It’s which loan program is right for your specific score, what lenders actually evaluate beyond your score and how to position yourself for approval.
This guide walks through exactly what you need to know: realistic expectations by credit score tier, the loan programs designed for borrowers with low scores, what mortgage underwriters actually look at when your credit is imperfect, the step-by-step process from initial inquiry to closing and the most common reasons borrowers get denied even when they meet the minimum score requirements. As a wholesale mortgage broker with access to programs that big banks don’t offer, we’ve helped thousands of buyers with credit challenges close on homes when other lenders said no. This guide reflects current 2026 lender guidelines, including Fannie Mae’s November 2025 decision to remove its longstanding 620 minimum credit score requirement.
What Counts as “Bad Credit” in the Mortgage World
Mortgage lenders use FICO credit scores ranging from 300 to 850. The lending industry classifies these scores into tiers but mortgage lenders specifically apply their own thresholds based on the loan programs they offer:
- 740 and above: Excellent. Best rates and terms available across all loan programs.
- 680 to 739: Good. Eligible for most conventional loan programs at competitive rates.
- 620 to 679: Fair. Conventional are become possible in this range though pricing adjustments apply. FHA loans are more attractive in this range.
- 580 to 619: Below average. As of November 2025, Fannie Mae no longer enforces a hard 620 minimum for loans approved through Desktop Underwriter, opening some conventional options in this range with strong compensating factors. FHA remains the more accessible path with 3.5% down.
- 500 to 579: Poor. FHA loans still possible but require at least 10% down.
- Below 500: Very limited. Mortgage qualification is challenging.
Most mortgage discussions of “bad credit” target the 500 to 619 range. This is the band where conventional approvals get more difficult and where specialized programs become essential. As of late 2025, however, options have expanded: Fannie Mae’s removal of its 620 minimum opened a path that didn’t exist before. If your score is in this range, you have options. They just aren’t the same options that someone with a 740 score has.
What Mortgage Lenders Actually Evaluate (Beyond Your Credit Score)
A common misconception is that your credit score alone determines whether you qualify. It doesn’t. The credit score is a major factor, but mortgage underwriting evaluates a complete financial picture. Two borrowers with identical 600 scores can have wildly different approval outcomes depending on the rest of their profile. Here’s what underwriters actually weigh:
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio is your monthly debt payments divided by your gross monthly income. For most loan programs, lenders want this below 43% (sometimes up to 50% with compensating factors). A borrower with a 580 score and a 30% DTI is often a stronger applicant than a borrower with a 680 score and a 48% DTI. Before applying, calculate your DTI honestly.
Employment and Income Stability
Lenders want to see at least two years of consistent employment, ideally in the same field. Job changes within the same industry are usually fine. Job changes that involve career switches or income drops raise concerns. For self-employed borrowers, two years of tax returns showing stable or increasing income is the standard.
Down Payment and Reserves
A larger down payment offsets credit weakness. A borrower with a 580 score and 10% down is a stronger applicant than a borrower with the same score and 3.5% down. Beyond the down payment itself, lenders want to see reserves: money in your bank account after closing equal to two to six months of mortgage payments. Reserves demonstrate that a financial setback won’t immediately put your loan at risk.
Recent Credit Activity
Lenders look closely at the past 12 to 24 months of your credit report. Late payments, collection accounts or new derogatory marks during that window weigh heavily even if your score has otherwise recovered. Conversely, a borrower whose score is low because of old issues but who has 24 months of clean recent payment history reads very differently than a borrower with the same score and recent late payments.
Mortgage underwriting recognizes that no single number tells the whole story. When one part of your profile is weak (like a low credit score), strong compensating factors elsewhere can compensate. The recognized compensating factors include: significant cash reserves, a low DTI, a long history with one employer, a substantial down payment, minimal new debt and successful housing payments at or above the proposed mortgage payment. Strong compensating factors can swing a borderline application to approval.
Loan Programs Available by Credit Score Tier
The most important decision when applying with bad credit is matching your score to the right loan program. The wrong program means getting denied while the right program means a path to approval.
500 to 579: FHA with 10% Down
With a score between 500 and 579 FHA loans are available but require at least 10% down payment and strong compensating factors. The minimum 580 threshold for the lower 3.5% down requirement is a hard cutoff. Lenders may also impose stricter overlay requirements (additional rules on top of FHA’s minimums), so an FHA approved score doesn’t guarantee an FHA approved loan from every lender. Working with a broker who shops multiple FHA approved lenders is important at this score range.
580 to 619: FHA with 3.5% Down
At 580 and above you may qualify for FHA’s 3.5% down payment program. Many borrowers in this range also qualify for VA loans (if eligible as a veteran or active duty service member) with no down payment, or USDA loans for rural and suburban properties with no down payment. As of November 2025, conventional loans are also possible in this range for the first time though approval depends heavily on compensating factors (covered in detail in the next section).
Below 620: Conventional Now Possible (With Strong Compensating Factors)
A significant change took effect in November 2025: Fannie Mae eliminated its longstanding 620 minimum credit score requirement for loans approved through its Desktop Underwriter (DU) system. Freddie Mac made a similar change in 2025. This means conventional loan approval is now technically possible with credit scores below 620 though it remains genuinely difficult.
Without a hard score floor, DU now evaluates the full borrower profile to determine eligibility. Borrowers with scores below 620 can be approved if their broader profile is strong: low DTI, substantial reserves, stable long term employment, a meaningful down payment and clean recent credit activity. Borrowers whose low score reflects recent late payments, open collections or unresolved derogatory items will generally still face DU denial. Individual lenders also continue to apply their own overlays: some accept the new flexibility, others still impose internal 620 floors regardless of agency rules. This makes working with a broker especially valuable for borrowers in the 580 to 619 range hoping to access conventional pricing instead of FHA.
620 to 679: Conventional Becomes Available
At 620 and above, conventional loans are available. Fannie Mae and Freddie Mac (the two agencies that back most conventional mortgages) accept applications throughout this range. Pricing is meaningfully worse than at 700+ scores due to loan level price adjustments but conventional is an option. FHA remains available and is often the better choice in the 620 to 679 range because of the difference in rate and underwriting flexibility.
620 and Above: Conventional & FHA Loans Available
At 620 and above, conventional loans are available. Fannie Mae and Freddie Mac (the two agencies that back most conventional mortgages) accept applications throughout this range without needing all the factors that comes with sub 620 applications. Pricing is meaningfully worse than at 700+ scores due to loan level price adjustments but conventional is an option. FHA remains available and is often the better choice in the 620 to 679 range because of the difference in rate and underwriting flexibility. The decision between FHA and conventional in this range depends on your down payment and debts.
The Step-by-Step Process to Get a Mortgage with Bad Credit
Step 1: Review Your Own Credit Report
Before doing anything else, pull your full tri-merge credit report from AnnualCreditReport.com (federally mandated free access from all three bureaus). Look for errors. The Federal Trade Commission found that one in five consumers has at least one error on their credit report and many of those errors hurt scores. Common fixable errors include accounts that don’t belong to you, incorrect late payment marks, accounts still showing balances after they’ve been paid off and accounts that should have aged off (most negative items must be removed after 7 years; bankruptcies after 10 years).
Step 2: Calculate Your Real Debt-to-Income Ratio
Add up all your minimum monthly debt payments: credit cards, auto loans, student loans, child support, alimony and any other recurring debt. Divide that total by your gross monthly income (before taxes). The result is your DTI. If it’s above 43%, focus on paying down debt before applying for a mortgage. Sometimes paying off a single small debt (like a $300 credit card balance with a $50 minimum payment) can drop your DTI enough to change the loan programs available to you.
Step 3: Talk to a Mortgage Broker
This matters more for bad credit applicants than for any other type of borrower. Retail banks generally only offer their own products and most banks don’t underwrite aggressively for sub 680 borrowers. Mortgage brokers (especially wholesale brokers) shop your application to multiple lenders, including non-QM and portfolio lenders that don’t market directly to consumers. The same borrower might be denied by their primary bank and approved by a specialty lender accessed through a broker. The broker advantage became even more pronounced after Fannie Mae’s 2025 changes since some lenders embrace the new sub-620 flexibility while others maintain stricter overlays. If your credit is a challenge, the broker channel is often the difference between approval and denial.
Step 4: Get Pre-Approved
Pre-approval is a formal review of your finances by a lender, resulting in a written letter stating the loan amount you qualify for. This is different from pre-qualification (which is informal and based on information you state, not verify). Pre-approval requires documentation: pay stubs, W-2s or tax returns, bank statements, photo ID and authorization for a credit pull. Plan on 2 to 5 business days for a thorough pre-approval. Don’t skip this step. Sellers in any market take pre-approved buyers seriously and dismiss buyers who haven’t been through the process.
Step 5: Find a Property and Make an Offer
With pre-approval in hand, you can shop within your verified price range. Work with a real estate agent who has experience handling FHA or non-QM transactions. When you find a property, your offer should be paired with the pre-approval letter. Sellers who have multiple offers commonly weigh financing strength heavily.
Step 6: Submit Full Loan Application and Underwriting
After the offer is accepted the loan moves into formal underwriting. Underwriters re-verify everything from pre-approval plus any additional documentation needed for your specific situation. They review an appraisal, verify employment with your employer directly and review the title work. Underwriting for bad credit applications often involves conditional approvals where the lender approves the loan but requires additional documentation or explanations before final approval. Respond to underwriter requests immediately. Delays at this stage are the most common cause of failed closings.
Step 7: Close
At closing, you sign the loan documents, pay your down payment and closing costs and take title to the property. From application to closing, expect 30 to 45 days for a standard transaction. Bad credit transactions sometimes take longer if underwriting requires extensive documentation or condition clearance.
How to Strengthen Your Application Before You Apply
If you’re not yet ready to apply, the months before applying are the most important to improve your odds. Specific actions that help:
Pay Down Credit Card Balances Below 30% Utilization
Credit utilization (your card balances divided by your credit limits) is one of the largest factors in your FICO score. Bringing utilization below 30% can boost scores noticeably within a single statement cycle. Below 10% utilization is even better. If you have one card at 90% utilization and others at 0%, paying down the high-balance card has a bigger impact than spreading the same amount across multiple cards.
Don’t Close Old Credit Accounts
Length of credit history matters. Closing your oldest credit card to “simplify finances” actually shortens your credit history and reduces your total available credit (which raises your utilization ratio). Keep old cards open even if you don’t use them especially before applying for a mortgage.
Don’t Apply for New Credit
Each new credit application generates a hard inquiry which can drop your score. New accounts also lower your average account age. In the 12 months before applying for a mortgage avoid all new credit applications unless absolutely necessary. This includes auto loans, store cards, personal loans and credit limit increase requests that trigger hard pulls.
Why a Wholesale Broker Matters More When You Have Bad Credit
The mortgage industry has two main lender types: retail (banks, credit unions, and direct lenders that originate to consumers) and wholesale (lenders that work only through mortgage brokers, who in turn work with consumers). For prime borrowers with 740+ scores, the difference is mostly a matter of pricing. For bad credit borrowers, the difference is often the difference between approval and denial.
Retail banks generally apply tighter overlays (additional rules on top of agency minimums) on bad credit applications because their internal risk management is conservative. Wholesale lenders compete for broker business which means they offer more aggressive programs, broader product menus and often more flexible underwriting. A broker with relationships across 30 to 50 wholesale lenders has access to specialty programs that no single retail bank offers. As an independent wholesale broker, Alpine Mortgage shops applications across this full spectrum which is particularly valuable for borrowers with credit challenges, post-bankruptcy applicants or self-employed buyers whose income is harder to document.
The broker advantage became even more meaningful after Fannie Mae’s November 2025 changes. With the 620 minimum eliminated, lenders now have discretion in how they treat sub-620 applications. Some have embraced the new flexibility and approve borrowers other lenders still automatically decline while others maintain conservative internal 620 floors. Without shopping multiple lenders a borrower with a 605 score might get denied by one lender and approved by another with the same application. A broker shopping the file across multiple wholesale lenders is the practical way to find the lender willing to underwrite to the new flexibility.
For additional guidance based on your situation see our page on bad credit mortgage loans. We’ve helped thousands of borrowers in challenging credit situations close on homes when other lenders couldn’t, and we’d be glad to review your specific scenario.
Important disclaimer. This article is provided for general informational and educational purposes only. It does not constitute legal advice, tax advice, or financial advice. Mortgage underwriting standards, loan program guidelines and credit reporting rules change over time and vary by lender. Before making decisions about your credit or applying for a mortgage, consult with a licensed mortgage professional who can review your specific situation. Mortgage products referenced in this article are subject to credit approval, underwriting guidelines, and program availability. Rates, terms, and program guidelines are subject to change without notice.
FAQs
What’s the lowest credit score I can have and still get a mortgage?
FHA loans are available with credit scores as low as 500 (with at least 10% down for scores between 500 and 579, and 3.5% down for scores 580 and above). As of November 2025, Fannie Mae also eliminated its 620 minimum for conventional loans run through Desktop Underwriter, meaning conventional approval is technically possible below 620 with strong compensating factors though it’s harder. Below 500, options are very limited as FHA and conventional are not available.
Will applying for a mortgage hurt my credit score?
A mortgage application generates a hard inquiry on your credit report which typically drops your score by a few points temporarily. However, mortgage shopping protections allow multiple mortgage inquiries within a 14 to 45 day window (depending on the credit scoring model) to count as a single inquiry. Shop multiple lenders within a short timeframe to minimize the credit impact.
How long does it take to improve my credit score enough to qualify for a better mortgage?
Credit improvement timelines vary based on the issues on your report. Paying down credit card balances can show score improvements within one or two billing cycles (30 to 60 days). Recovering from major events like collections or bankruptcies takes 12 to 24 months of consistent on-time payments to show meaningful improvement. Most mortgage borrowers see significant score gains within 6 to 12 months.
Can I get a mortgage with collections on my credit report?
Yes, in many cases. Different loan programs treat collections differently. FHA loans generally allow unpaid collections under $2,000 to remain unpaid (with documentation requirements), while collections above that threshold typically must be paid or in an active payment plan. Conventional loans generally require collections to be paid before closing.
Do I need a co-signer if I have bad credit?
A co-signer can help if your DTI or credit history is the limiting factor, but co-signers don’t help if your credit score is below the loan program’s minimum. The co-signer’s score doesn’t replace your score; both applicants are evaluated and the loan is generally underwritten to the lower of the two scores.
