How to Qualify for a Mortgage with Bad Credit

Minimum Credit Scores by Loan Type

What Lenders Actually Look At

The credit score is just the start. Mortgage underwriters review:

1. Mid-score of the three bureaus (not the highest)
2. Lowest mid-score when there are two borrowers
3. Payment history on housing-related items (rent, prior mortgages)
4. Recent credit activity — no new accounts in 6+ months helps
5. Debt-to-income ratio — under 43% for most programs
6. Two years of stable employment
7. Reserves — 2–6 months of mortgage payments in savings

Paths if Your Credit Isn't There Yet

1. FHA Loan

The most flexible. A 580 FICO and 3.5% down gets you approved. Even past bankruptcies (2 years out) and foreclosures (3 years out) qualify.

2. Manual Underwriting

Some lenders manually underwrite VA and USDA loans, considering rent history and savings instead of just the FICO score.

3. Non-QM Loans

Bank statement loans, asset-based loans, and DSCR (investment property) loans don't always require traditional credit qualifying — but rates are 1–3% higher.

4. Co-signer or Co-borrower

A spouse or family member with stronger credit can be added to qualify.

What to Fix Before You Apply

1. Collections over $5,000 — usually must be paid or in a payment plan.
2. Unpaid judgments — must be resolved.
3. Credit utilization — get below 30% (ideally under 10%) before the lender pulls.
4. Inquiries — stop applying for new credit 6 months before mortgage shopping.
5. Disputed items — many lenders require disputes to be closed before approval. Remove or finalize disputes 60 days before applying.

Real Timeline

If your score is 580 and you want 680:

• Months 1–2: Dispute removals and pay down cards
• Months 3–4: Add positive tradelines, authorized user accounts
• Months 5–6: Score should hit 660–700
• Month 7+: Lock in pre-approval

Six months of focused work can save you tens of thousands over the life of a mortgage.

Talk to us about a mortgage-ready credit plan.