Bad Credit First-Time Home Buyer Options: How to Buy a House with Poor Credit

Bad Credit First-Time Home Buyer Options: How to Buy a House with Poor Credit

A low credit score makes buying a home harder, but it does not make it impossible. Research and lender data show that buyers with scores as low as 500 can qualify for FHA loans with the right circumstances, and there are specific programs designed to help buyers with damaged credit histories become homeowners.

If you are not sure what you can qualify for right now, the fastest way to find out is to check what lenders are actually offering. LendingTree lets you see what loan options are available based on your real credit profile.

For guidance on improving your score before applying, see the First-Time Home Buyer Credit Score Requirements guide. For a full overview of the process, see the First-Time Home Buyer Guide 2026.

What Credit Score Is Needed to Buy a House?

FHA Loans: The Most Accessible Option for Low Credit

FHA loans are the most commonly used mortgage product for first-time buyers with below-average credit. Backed by the Federal Housing Administration, these loans allow lenders to offer financing to borrowers with credit scores as low as 500.

FHA with a 500-579 Score

A score between 500 and 579 technically qualifies for an FHA loan, but only with a 10% minimum down payment. In practice, finding a lender willing to approve scores below 580 takes more searching, and rates will be higher. This path is viable but challenging. See the FHA loan requirements guide for the full picture.

FHA with a 580+ Score

At 580, the minimum down payment drops to 3.5%. More lenders are willing to work with scores in this range, making the approval process more straightforward.

Non-QM Loans

Non-Qualified Mortgage (non-QM) loans are offered by some lenders outside of standard Fannie Mae, Freddie Mac, FHA, VA, and USDA guidelines. They can accommodate borrowers with lower credit scores, recent bankruptcy, or non-traditional income documentation. Non-QM loans typically carry higher interest rates to compensate lenders for the increased risk.

Steps to Take if Your Credit Is Too Low Right Now

Check Your Credit Report for Errors

Research shows that a meaningful percentage of credit reports contain errors. Disputed errors that are verified inaccurate can be removed, potentially improving your score significantly with no change in your actual credit behavior. Request free reports from all three bureaus at AnnualCreditReport.com and dispute any inaccuracies directly with the bureau.

Become an Authorized User

If someone with excellent credit adds you as an authorized user on an old account with a strong payment history, that account’s positive history can be added to your credit report. Buyers report score improvements of 20 to 50 points from a single well-aged authorized user addition in some cases.

Bring All Accounts Current

Payment history is the largest component of a credit score (35% of FICO). If you have any accounts with missed payments, bringing them current and maintaining on-time payments creates score improvement over time.

Reduce Credit Card Utilization

Credit utilization (balances divided by credit limits) is the second-largest scoring factor. Reducing balances below 30% of each card’s limit — and ideally below 10% — can produce meaningful score improvements, sometimes within one billing cycle after the new balance reports.

Avoid New Credit Applications

Each hard inquiry temporarily reduces your score by a few points. Avoid applying for new credit cards, auto loans, or other debt while building your score toward mortgage-qualifying range.

How Long Does Credit Repair Take?

Down Payment Assistance for Bad Credit Buyers

Some down payment assistance programs specifically serve buyers with lower credit scores. State Housing Finance Agency (HFA) programs often combine first mortgage financing with down payment assistance grants or second loans. See the down payment assistance by state guide for programs in your state.

HUD-Approved Housing Counseling

HUD-approved housing counselors offer free or low-cost guidance for buyers working to improve their credit and prepare for homeownership. Counselors can review your specific credit report, create a customized plan, and connect you with local assistance programs. Find a HUD-approved counselor at hud.gov/counseling.

Lenders Who Work with Low Credit Scores

Bottom Line

Bad credit is a barrier to homeownership, not a permanent wall. FHA loans remain accessible at 500+ credit scores, and strategic credit repair can move buyers from below-qualifying to qualified within 6 to 24 months depending on the issues involved. Start by knowing exactly where your score stands and what specific factors are holding it down.

Check what mortgage options are available for your credit score right now through LendingTree.