How To Get Home Financing With Bad Credit

by Mario Cottman

How To Get Home Financing With Bad Credit: A Guide for Buyers Who Want to Win

If you've ever wondered how to get home financing with bad credit, you're not alone. Buying a home is one of the biggest financial decisions you’ll ever make—but what if your credit score isn’t perfect?

Here’s the truth: Home financing with bad credit is possible. In fact, according to Experian, nearly 30% of Americans have a credit score below 670, which is considered “fair” or “poor.” Yet many still go on to become homeowners.

In this detailed guide, we’ll walk you through exactly how to get home financing, even if your credit isn’t where you want it to be. You’ll learn what lenders are looking for, the programs available to help you, and how to position yourself as a strong buyer—even with a lower score.


What Is Considered Bad Credit?

Before diving into solutions, let’s define the challenge:

Credit Score Range Credit Rating
800 – 850 Excellent
740 – 799 Very Good
670 – 739 Good
580 – 669 Fair
300 – 579 Poor

(Source: Experian)

If your credit score is below 670, lenders may consider you a higher risk. But that doesn’t mean you can’t get a mortgage. It just means you’ll need to be strategic.


How To Get Home Financing With Bad Credit: Start With Your Credit Report

The first step in how to get home financing with bad credit is knowing what you’re working with.

  • Check all three credit bureaus (Experian, Equifax, TransUnion) for errors.

  • Dispute any inaccuracies that could be pulling your score down.

  • Monitor your score monthly using free tools like Credit Karma or Credit Sesame.

According to the Federal Trade Commission, 1 in 5 people have an error on at least one of their credit reports that could affect their score.


Loan Programs That Help Buyers With Bad Credit

One of the best-kept secrets in real estate is that there are home financing options specifically for buyers with bad credit. Here are some of the most popular:

1. FHA Loans – The #1 Option for Bad Credit Buyers

  • Minimum credit score: 500 (with 10% down), or 580 (with 3.5% down)

  • Backed by the Federal Housing Administration

  • More forgiving debt-to-income requirements

Example: If you have a 580 score and $7,000 saved, you could afford a $200,000 home with 3.5% down using an FHA loan.

2. VA Loans – For Veterans & Active-Duty Service Members

  • No minimum credit score required by the VA (but lenders usually want 580–620)

  • No down payment needed

  • No private mortgage insurance (PMI)

3. USDA Loans – For Rural & Suburban Home Buyers

  • Minimum credit score: around 640

  • No down payment

  • Income must meet rural development guidelines

4. Subprime Loans – Last Resort Option

  • Higher interest rates

  • Larger down payments

  • May include fees

Use with caution. Subprime loans can work in the short term but may not be the best long-term solution.


How To Get Home Financing: Strategies to Improve Approval Odds

Even with bad credit, you can boost your chances of approval:

1. Increase Your Down Payment

Lenders may overlook bad credit if you can put 10%–20% down. This shows financial stability.

2. Get a Co-Signer

A trusted family member with good credit can strengthen your application.

3. Reduce Your Debt-to-Income Ratio (DTI)

Aim for a DTI under 43%. Pay down credit cards or personal loans before applying.

4. Write a Letter of Explanation

Tell lenders what caused your credit issues and how you’ve improved. This human touch can make a difference.


Common Mistakes to Avoid When Buying a Home With Bad Credit

Learning how to get home financing with bad credit also means knowing what not to do:

  • Do not apply for multiple credit cards before applying for a mortgage.

  • Do not hide your financial history—be transparent with lenders.

  • Do not forget to budget for closing costs (usually 2–5% of the home price).


Real-Life Example: Marla’s Journey to Homeownership With a 560 Credit Score

Marla, a single mom in Texas, had a 560 credit score, $5,000 in savings, and two collections on her credit. She:

  • Pulled her free credit reports

  • Disputed two inaccurate collection accounts

  • Worked with a loan officer who specialized in home financing with bad credit

  • Got approved for an FHA loan with 3.5% down and bought a $180,000 home

Now, she’s building equity instead of renting—and you can too.


How Long Does It Take to Buy a Home With Bad Credit?

  • Credit Cleanup: 1–3 months for basic corrections

  • Pre-Approval to Closing: 30–60 days

  • Total Timeline: 2–6 months, depending on your situation


Final Thoughts: How To Get Home Financing With Bad Credit Is About Strategy

Buying a home with bad credit is possible—you just need the right tools, information, and support.

If you're asking yourself, "How to get home financing?" or "Can I really buy a home with bad credit?"—the answer is yes. The key is preparation, patience, and the right professionals by your side.


Need Help Buying a Home With Bad Credit?

I specialize in helping first-time buyers just like you. Whether your credit score is 580 or 650, I can guide you step by step through the process of how to get home financing.

Contact Me Here

Let’s talk about your path to homeownership—even if you have bad credit. Your future home is closer than you think.


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Mario Cottman

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