There has been a lot of information that’s swirling around on the internet lately, some of it right, some of it wrong, surrounding credit scores. I’m creating this Credit Myths series as a resource for some of the more commonly asked questions about credit scores.

Can I get a Mortgage with a Low Credit Score?

Yes, it’s possible to get a mortgage with a low credit score, but it may be more challenging and come with certain trade-offs. Most lenders prefer borrowers with higher credit scores because it indicates a lower risk of default. However, there are loan programs specifically designed to help people with less-than-perfect credit become homeowners.

For example, FHA (Federal Housing Administration) loans are a popular option for borrowers with credit scores as low as 500, though a minimum score of 580 is typically required to qualify for the lowest down payment (3.5%). Those with scores between 500 and 579 may still qualify but are usually required to put down at least 10%.

Other programs, like VA loans (for veterans) and USDA loans (for rural homebuyers), also offer more lenient credit requirements, though each lender sets its own standards.

Having a low credit score often means:

  • Higher interest rates, which increase the overall cost of the loan.

  • Larger down payments in some cases.

  • More thorough documentation of your financial situation.

To improve your credit score and your chance of a mortgage approval, consider the following:

While it’s not easy, getting a mortgage with a low credit score is achievable, especially with the right strategy and loan program. It’s also a good idea to work on improving your credit before applying, which can lead to better loan terms and long-term savings.

If your score is lower than you’d like, you’d probably benefit from a service like this one which lets you keep track of your credit and improve it for you.