Bad credit? Here’s what you need to know to get a mortgage


Credit scores play a vital role in your ability to get a home mortgage.

First things first: Credit scores are used to predict the likelihood of a payment default. And if your credit score isn’t in great shape, it may result in more scrutiny applied to your loan application.

Read more: Tips for first-time homebuyers

What’s considered a low score to mortgage lenders?

If you’re looking for a conventional loan, having a credit score of less than 680 is generally considered a low score. However, you may be able to get one of these loans with a 620 credit score.

For Federal Housing Administration loans and government mortgages, a low score is considered anything under 620. Not all, but most, lenders will offer FHA mortgages with a credit score requirement as low as 580. This is where rubber meets the road in attaining an approval.

Expect the following if your score is less than 620:

  • a 43% debt-to-income ratio requirement
  • Higher rates and fees than you’d see if you had a score of 620+
  • Extensive questions about your financial background

The FHA does not have a maximum debt-to-income ratio requirement, but stresses the lender originating the FHA mortgage should use prudence and responsible underwriting in making sure they properly vet each low score application.

FHA credit score tiers include:

  • 582-599
  • 600-619
  • 620+

Each tier generates different rates and fees when you apply. It is important to be aware your lender will need some time to process your loan. It is reasonable to expect that a review of your file with a low credit score could take upwards of 45 days to close on an escrow. This is not to say you shouldn’t apply for a mortgage because you can’t get it closed in a timely manner, but just something to be aware of to help you plan accordingly.

Read more: How to find the best mortgage rate


Try to improve your scores first

If you can swing it, getting your score higher in any one or more of the following ways can not only help you reduce the rate and fees that accompany a home loan, but can also make your mortgage process faster.

  • Pay off a debt in full.
  • Pay an account down so you’re only using 30%, ideally 10%, of your credit limit (the lower, the better).
  • Pay off an old collection account (Note: This strategy should be done with extreme prudence as it could have an inverse effect on your credit.).

Read more: Best and quickest ways to improve your credit score

You can see where your credit currently stands by reviewing your free credit report summary, updated monthly, on If your credit is so-so and you’re looking to buy or refinance a home, you may consider seeking the advice of an experienced loan professional. (Full Disclosure: I am mortgage lender.)

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