Modus Mortgage

Should You Buy a Home with Bad Credit?

Do you have less-than-ideal credit? That doesn’t mean you have to give up on your dream of becoming a homeowner. When you apply for a loan, mortgage lenders assess a number of variables, and there are even solutions available for individuals with bad credit. Continue reading to find out more about buying a home with bad credit.

What Is 'Bad' Credit When It Comes to Home Loan Financing?

Lenders use FICO® to construct the scores from the three major credit bureaus (Equifax®, Experian™, and TransUnion®) to assign an overall credit score to evaluate if you qualify for a loan and at what interest rate you qualify. The score will range from 300 to 850 and will be determined by elements such as:

  • Payment history
  • Amount owed
  • Length of credit history
  • Type of credit
  • Credit inquiries

When it comes to qualifying for a mortgage, a credit score of 620 or lower is considered poor.

Can You Get a Mortgage with Poor Credit?

While getting a home loan with a credit score below 620 may be difficult, it is attainable. Two of the most common mortgage programs for those with bad credit are FHA and VA loans.

Loan Programs That Accommodate Low Credit Scores

FHA Loans

The Federal Housing Administration (FHA) offers government-insured loans with a lower credit threshold.

FHA loans provide both smaller down payments and, in many cases, attractive interest rates. Additionally, if your median credit score is 580 or higher, your down payment may be as low as 3.5 percent.

VA Loans

You may be eligible for a VA loan from the Department of Veterans Affairs if you are a veteran or actively serving in the military. Although some lenders will set their own minimum credit score for a VA loan, there isn’t a standard requirement.

Also, there’s no down payment required with a VA loan or necessary mortgage insurance. Even though VA loans have a more generous credit score requirement, you’ll still must be:

    • Currently active in the United States military.
    • Have been honorably discharged
    • A surviving spouse of a veteran who died in service or from a service-related incapacity.
    • Able to obtain a VA Certificate of Eligibility
    •  You or your spouse must reside in the home

Pros and Cons to Getting a Mortgage with Bad Credit


You should evaluate the current low rates as well as other market conditions. Also, rent tends to grow quicker than mortgage payments, which may force you out of your ideal area if you continue to rent. There’s also the gratification of being able to customize your living area (design or refurbishment). Having a permanent home is also a joy.


A larger down payment may be required. You’ll have to pay a mortgage insurance premium for the life of the loan if you get an FHA loan. You’ll have a greater interest rate than if you had good credit.

Many people mistakenly believe that purchasing a property with bad credit is either impossible or a bad idea, but neither is true. A variety of things influence your ability to obtain a home loan, and you might be surprised at how ideal this time is for you to purchase your first home. For individualized assistance, please contact us immediately.


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