Bad credit can make buying your first home harder, but it doesn’t automatically mean you have to wait. FHA, conventional, USDA, and VA loans have different qualification requirements, and some mortgage lenders are more flexible than others.
We reviewed current mortgage program guidelines from Fannie Mae, FHA, USDA, and VA to compare your options. Here’s what you need to know about qualifying for a first mortgage, covering upfront costs, and deciding whether you’re ready to buy.
Can You Buy Your First Home With Bad Credit?
Yes, you can buy your first home with bad credit if you meet the requirements for an eligible mortgage program. Some programs allow lower credit scores, while others give lenders more flexibility to evaluate your income, debts, savings, and credit history.
However, qualifying for a mortgage doesn’t necessarily mean you’ll receive affordable terms. Bad credit can lead to higher interest rates, larger down payment requirements, or additional restrictions from the lender.
Your first step should be to determine which mortgage programs you might qualify for. Then you can compare their costs and decide whether buying now makes financial sense.
What Credit Score Do First-Time Homebuyers Need?
There’s no single minimum credit score for first-time homebuyers. The requirements depend on the mortgage program, the lender, and your financial situation.
Here’s how the major mortgage programs compare.
| Mortgage Type | Credit Score Requirements | Minimum Down Payment |
|---|---|---|
| FHA | 500–579 with 10% down; 580 or higher with 3.5% down | 3.5% or 10% |
| Conventional | Varies by lender and underwriting method | As low as 3% |
| USDA | No USDA-imposed minimum credit score | 0% |
| VA | No VA-imposed minimum credit score | 0% for eligible borrowers |
These are program-level requirements. Individual lenders can apply stricter credit standards, and meeting a minimum credit score requirement doesn’t guarantee approval.
One important change affects conventional mortgages. In November 2025, Fannie Mae removed its previous 620 minimum credit score requirement for new loans evaluated through Desktop Underwriter. The system now assesses multiple credit risk factors instead of relying on a single minimum credit score.
That doesn’t mean everyone with a credit score below 620 can qualify for a conventional loan. Lender requirements and other underwriting rules still apply.
Best Mortgage Options for First-Time Homebuyers With Bad Credit
Four major mortgage programs are worth considering if you’re buying your first home with bad credit. Each has different credit requirements, down payment options, and costs.
The best choice depends on more than which program offers the lowest minimum credit score. Mortgage insurance, lender fees, interest rates, and eligibility restrictions can all affect your decision.
FHA Loans for Low Credit Scores
FHA loans are often a practical starting point for first-time homebuyers with bad credit. The Federal Housing Administration insures these mortgages, which reduces the risk for lenders.
Borrowers with a credit score of at least 580 may qualify with a 3.5% down payment. Those with credit scores from 500 through 579 must make a down payment of at least 10% under FHA program rules.
Not every FHA lender accepts applications with credit scores that low. Some lenders have higher minimum requirements, so it’s worth contacting more than one.
FHA loans also require mortgage insurance. Most borrowers pay an upfront mortgage insurance premium equal to 1.75% of the base loan amount, plus an annual premium that’s usually collected through monthly payments.
For most new FHA loans with a down payment below 10%, annual mortgage insurance continues for the full mortgage term. That can make an FHA loan more expensive over time than a conventional mortgage with cancellable private mortgage insurance.
FHA loans aren’t limited to first-time buyers. They may also work for borrowers who have purchased homes before but need more flexible credit requirements.
Conventional Loans With Low Down Payments
Conventional mortgages aren’t insured by the federal government. Many follow standards established by Fannie Mae or Freddie Mac.
Some conventional mortgage programs allow down payments as low as 3%. Fannie Mae’s HomeReady program is one example. It’s designed for eligible lower-income borrowers and generally limits qualifying income to 80% of the area median income.
Conventional loans can be worth comparing even if your credit score isn’t especially strong. Fannie Mae’s updated automated underwriting rules give lenders a way to evaluate credit risk without the former 620 minimum credit score threshold.
However, a lender may still require a higher credit score or stronger finances before approving your application.
Another advantage is mortgage insurance. Conventional loans typically require private mortgage insurance when the down payment is below 20%, but borrowers may qualify to remove it after meeting certain equity and payment requirements.
If you qualify for both FHA and conventional financing, request estimates for each. The conventional option could cost less over time, even if its initial interest rate is slightly higher.
USDA Loans With No Down Payment
USDA loans can help eligible buyers purchase homes in rural areas and certain suburban communities without a down payment.
The USDA Single Family Housing Guaranteed Loan Program doesn’t establish a minimum credit score. However, applicants must demonstrate that they can manage debt and repay the mortgage. Individual lenders may impose their own credit score requirements.
Eligibility also depends on the property and household income. The home must be in a USDA-eligible area, and household income generally can’t exceed 115% of the area’s median household income under the guaranteed loan program.
USDA loans don’t require conventional private mortgage insurance, but they do have program fees. These generally include an upfront guarantee fee and an annual fee that’s collected monthly.
You can review the USDA Single Family Housing Guaranteed Loan Program to check the current requirements and find participating lenders.
A USDA loan may make sense if you qualify based on your location and income but haven’t saved enough for a down payment.
VA Loans for Eligible Military Borrowers
VA loans provide another option for eligible veterans, active-duty service members, and certain surviving spouses.
The Department of Veterans Affairs doesn’t set a minimum credit score for VA-backed mortgages. Lenders make their own credit decisions and evaluate income, debts, and repayment history.
Eligible borrowers may qualify without a down payment. VA loans also don’t require monthly mortgage insurance.
However, many borrowers must pay a one-time VA funding fee. The amount depends on the down payment, loan type, and previous use of VA benefits. Certain borrowers qualify for an exemption.
If you meet the service requirements, you can request a Certificate of Eligibility to establish your eligibility for the VA home loan benefit.
Our VA home loan guide explains the qualification process. You can also read more about getting a VA loan with bad credit if your credit history is your biggest concern.
First-Time Homebuyer Assistance Programs for People With Bad Credit
A low credit score isn’t always the only obstacle to buying your first home. You may qualify for a mortgage but lack the savings needed for a down payment and closing costs.
State housing finance agencies, local governments, and nonprofit organizations offer programs that help eligible homebuyers cover these expenses.
Some provide grants that don’t require repayment. Others offer forgivable loans, deferred-payment loans, or second mortgages that must eventually be repaid.
The requirements vary considerably. A program may have income limits, minimum credit score requirements, home purchase price limits, or restrictions on eligible neighborhoods.
Some programs also require a homebuyer education course or the use of an approved mortgage lender.
Start with your state housing finance agency and ask which programs work with FHA, conventional, USDA, or VA financing. Before accepting assistance, confirm whether you’ll have to repay the money if you sell, refinance, or move out of the home.
Down payment assistance may reduce the cash you need at closing, but it won’t automatically overcome a mortgage lender’s credit or income requirements.
What Else Do Mortgage Lenders Check Besides Your Credit Score?
Mortgage lenders evaluate your ability to repay the loan, not just your credit score. Several financial factors can strengthen or weaken your application.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) compares your required monthly debt payments with your gross monthly income.
For example, suppose your gross monthly income is $6,000 and your total monthly debt payments would be $2,400 after purchasing a home. Your debt-to-income ratio would be 40%.
Mortgage lenders generally include the proposed housing payment, car loans, student loans, credit card minimum payments, and certain other obligations when calculating this ratio.
The maximum permitted debt-to-income ratio depends on the mortgage program and underwriting decision. A lower ratio can improve your qualification chances, especially when your credit score is weak.
Income and Employment History
Lenders want evidence that your income is stable enough to support your mortgage payments.
They commonly review pay stubs, tax returns, W-2 forms, bank statements, and employment history. Self-employed borrowers may need additional records.
You don’t necessarily need to work for the same employer for several years. What matters is whether the lender can document reliable qualifying income under the loan program’s rules.
Savings and Cash Reserves
Savings can strengthen a mortgage application because they show that you have resources beyond your monthly income.
Some mortgage programs require reserves under certain circumstances, while others don’t have a standard reserve requirement for every borrower.
Even when reserves aren’t mandatory, keeping money aside for emergencies is important. A mortgage payment doesn’t disappear if your car breaks down or you temporarily lose income.
Recent Payment History
Lenders also examine how you’ve handled credit recently.
Late payments, unpaid collections, charge-offs, bankruptcies, and foreclosures can affect mortgage eligibility. Some major credit events also trigger mandatory mortgage waiting periods.
The rules differ by loan program. A borrower with older credit problems and a recent history of on-time payments may have different options from someone who has missed several payments in the past few months.
How Much Money Do You Need to Buy Your First Home?
Your down payment is only part of the upfront cost of buying a home. You’ll also need to account for closing costs, prepaid expenses, and money to keep in savings after the purchase.
Here’s a simple example for a $300,000 home with an FHA loan and a 3.5% down payment.
| Expense | Estimated Amount |
|---|---|
| Home purchase price | $300,000 |
| Down payment (3.5%) | $10,500 |
| Closing costs (2%–5%) | $6,000–$15,000 |
| Total estimated upfront cash | $16,500–$25,500 |
This example is an estimate, not a lender quote. The final amount depends on your mortgage terms, location, and transaction costs. Seller credits, assistance programs, and financed program fees can also change what you need at closing.
A conventional mortgage with 3% down would require a $9,000 down payment on the same home. USDA and VA loans may eliminate the down payment for eligible borrowers, but other closing expenses can still apply.
You can learn more about how much you need for a down payment before deciding how much cash to set aside.
Your monthly budget matters just as much as your upfront costs. Principal, interest, property taxes, homeowners insurance, mortgage insurance, and any homeowners association fees can all affect what you’ll pay.
Don’t spend every dollar you’ve saved just to qualify for the purchase. You’ll still need money for repairs, moving expenses, and unexpected costs after you become a homeowner.
How to Qualify for Your First Mortgage With Bad Credit
Your chances of qualifying depend on your current finances and the mortgage program you choose. A few practical steps can help you identify problems before you submit an application.
Here’s the order I’d recommend.
- Check your credit score: Start by checking your credit score. Free services can help you monitor your credit, but the credit score you see may differ from the mortgage credit score a lender uses. For example, Credit Karma generally provides VantageScore credit scores rather than the FICO credit scores many mortgage lenders use. Our Credit Karma review explains how that service works.
- Review your credit report: Obtain your free credit report from each of the three major credit bureaus through AnnualCreditReport.com. Look for incorrect balances, accounts that don’t belong to you, and inaccurate late payments. If you’re unsure what to check, read our guide to reading your credit report. You can also dispute credit report errors before applying for a mortgage.
- Reduce debt and protect your credit score: Lower credit card balances can improve your credit utilization ratio and may help your credit score. Paying down certain debts can also reduce your debt-to-income ratio. Avoid new credit applications or large purchases that increase your monthly obligations shortly before you apply. Our guide to improving your credit score covers additional steps.
- Set a realistic homebuying budget: Determine how much you can comfortably pay each month and how much cash you can use for a purchase. Account for taxes, insurance, maintenance, and savings rather than relying only on the maximum loan amount a lender might approve. Crediful’s first-time homebuyer guide covers the broader homebuying process.
- Compare lenders and request preapproval: Contact lenders that offer mortgage programs suitable for your credit history. Ask about their minimum credit score requirements, down payments, and any restrictions beyond the program standards. Our list of top mortgage lenders can help you start your search.
Once you receive mortgage offers, compare the Loan Estimates rather than focusing only on advertised interest rates.
Look at the annual percentage rate (APR), origination charges, discount points, mortgage insurance, estimated monthly payment, and total cash needed at closing.
Ask lenders to quote the same loan amount, loan term, and rate-lock period whenever possible. That makes it easier to compare their offers fairly.
Mortgage preapproval can help establish your purchasing budget, but it isn’t a guarantee of final approval. Your finances and the property must still satisfy the lender’s requirements.
Should You Buy Your First Home Now or Improve Your Credit Score First?
Buying now may make sense if you qualify for a mortgage with manageable monthly payments, have enough savings for closing costs, and can maintain an emergency fund after the purchase.
However, waiting could be the better financial decision if your credit score causes lenders to offer expensive terms or requires a down payment you can’t comfortably afford.
Even a one-percentage-point difference in your mortgage interest rate can have a substantial long-term effect.
Consider a $250,000 mortgage with a 30-year fixed rate:
| Interest Rate | Monthly Principal and Interest | Total Interest Over 30 Years |
|---|---|---|
| 6% | $1,499 | $289,595 |
| 7% | $1,663 | $348,772 |
These are hypothetical interest rates for illustration, not current lender offers. The figures exclude property taxes, homeowners insurance, mortgage insurance, and other costs.
The difference is about $164 per month and $59,200 in total interest over the full 30-year term.
A higher credit score doesn’t guarantee a particular interest rate. However, improving your credit profile could help you qualify for better terms, depending on the lender and market conditions.
If you have little credit history and don’t plan to apply for a mortgage soon, credit builder loans may help you establish a record of on-time payments. Keep in mind that a new loan also adds a debt obligation and may temporarily affect your credit score. It generally isn’t something to open right before a mortgage application.
Before postponing your purchase, ask a mortgage lender what specific changes could improve your application. You may find that paying down one credit card or correcting an error on your credit report matters more than waiting for an arbitrary credit score target.
Final Thoughts
Your first home purchase doesn’t have to depend on achieving a perfect credit score. FHA, conventional, USDA, and VA mortgages offer different paths to qualification, and the lender you choose can affect which options you can pursue.
Start by checking your credit, calculating your full housing budget, and identifying mortgage programs that fit your financial situation. Then compare actual loan offers before deciding whether to buy now or improve your finances first.
The goal is to qualify for a mortgage you can comfortably afford, not simply to get approved.
Frequently Asked Questions
Can I qualify as a first-time homebuyer if I’ve owned a home before?
Yes, certain first-time homebuyer programs allow applicants who haven’t owned a primary residence during the previous three years. Some programs also have special exceptions for qualifying single parents and displaced homemakers.
The definition depends on the program, so check its specific eligibility rules before assuming you don’t qualify.
Can a family member help me qualify for a mortgage if I have bad credit?
Yes, some mortgage programs permit a family member to join your application as a non-occupant co-borrower. Their income and credit history may help, but the lender must evaluate the full application.
A family member may also be able to provide eligible gift funds for your down payment or closing costs. Those funds must meet the mortgage program’s documentation requirements.
A cosigner takes on legal responsibility for the debt if the borrower doesn’t repay it. Not every mortgage program permits cosigners, and a stronger co-borrower doesn’t guarantee approval.
What should I do if my first mortgage application gets denied?
Ask the lender for the specific reason your application was denied. Lenders must provide an adverse action notice or explain how to request the reasons for the decision.
The next step depends on the problem. You might need to reduce your debt-to-income ratio, correct inaccurate credit report information, establish more stable income, or save additional money.
Another lender may have different qualification standards. However, if you don’t meet a mortgage program’s mandatory requirements, changing lenders won’t eliminate those rules.
