Getting a Mortgage With Bad Credit
FHA lends at 500 with 10% down. Here is what each programme actually requires and what compensates for a weak score.
By Mike Basti, Licensed Mortgage Broker (NMLS #377740) · Updated September 2026
Minimum Scores by Programme
There is no single credit cutoff for a mortgage. Each programme sets its own floor, and lenders layer their own overlays on top.
| Programme | Minimum score | Down payment | Notes |
|---|---|---|---|
| FHA | 580 | 3.5% | Most common route below 620 |
| FHA | 500–579 | 10% | Fewer lenders participate |
| VA | no VA minimum | 0% | Lender overlays 580–620 |
| USDA | 640 typical | 0% | Income and area limits apply |
| Conventional | 620 | 3–20% | Pricing improves steeply above 680 |
| Non-QM | 620–680 | 10–25% | Weighs down payment over score |
What Lenders Weigh Besides the Score
Credit score is one input in an approval, not the whole file. Underwriters look for compensating factors, and a strong showing elsewhere can offset a weak score.
- Down payment. The single strongest offset. A 25% down payment changes the risk profile enough that some non-QM lenders will approve scores conventional lenders decline outright.
- Reserves. Cash left after closing, measured in months of payments. Six months of reserves is a meaningful compensating factor; twelve is strong.
- Payment history on housing. Twelve months of on-time rent or mortgage payments carries disproportionate weight, because it is the closest proxy for the debt being underwritten.
- Debt-to-income ratio. A low DTI signals capacity. Check yours with the DTI calculator.
- Job stability. Two years in the same field, ideally the same employer.
Why the Score Fell Matters
Underwriters distinguish between a pattern and an event. A single medical collection from a hospital stay reads very differently from six months of missed credit card payments, even at the same score.
If your credit damage came from a one-off event — job loss, divorce, medical bills — write a letter of explanation and document it. Underwriters have discretion on files with documented extenuating circumstances, and a clear paper trail is what lets them use it.
Manual underwriting
When an automated system declines a file, FHA and VA both allow manual underwriting, where a human reviews the whole picture rather than a score threshold. It requires stronger compensating factors — usually reserves and a clean 12-month housing history — but it approves files that automated systems reject. Not every lender offers it, which is another reason to work with a broker rather than a single lender.
California-Specific Considerations
California prices mean the loan amount is large relative to income even for modest homes, so debt-to-income becomes binding faster than in lower-cost states. A 580 score with a 50% DTI is a far harder file than a 580 score with a 35% DTI.
Down payment assistance can help bridge the gap. CalHFA programmes have their own credit minimums, typically 660 to 680, which are higher than base FHA — so assistance is often unavailable precisely when a borrower most needs it. See down payment assistance for the current requirements.
Related Pages
Frequently Asked Questions
What is the lowest credit score to buy a house in California?
FHA allows 500 with a 10% down payment, or 580 with 3.5% down. VA sets no published minimum, though most lenders impose an overlay between 580 and 620. Conventional financing generally requires 620. Below 500 there is no mainstream mortgage programme.
Can I buy a house with a 550 credit score?
Yes, through FHA with a 10% down payment, since the 500 to 579 band requires the larger down payment. Fewer lenders participate in that band, so a broker with access to multiple wholesale lenders matters more than usual at this score.
What compensates for a low credit score?
A larger down payment is the strongest offset, followed by cash reserves after closing, twelve months of documented on-time rent or mortgage payments, a low debt-to-income ratio, and stable employment. Underwriters weigh these together rather than treating the score as a pass/fail gate.
Does it matter why my credit score dropped?
Yes. Underwriters distinguish a one-off event from a pattern. Credit damage from a documented job loss, divorce or medical emergency is treated differently from sustained missed payments. Write a letter of explanation and attach documentation — that is what allows an underwriter to use their discretion.
What is manual underwriting?
When an automated underwriting system declines a file, FHA and VA allow a human underwriter to review the complete picture instead. It requires stronger compensating factors, typically reserves plus a clean twelve-month housing payment history. Not all lenders offer it.
Will a bigger down payment offset bad credit?
Substantially. Non-QM lenders in particular weight the down payment more heavily than the score — at 25% down some will approve files that conventional lenders decline outright. It also reduces the loan amount, which helps the debt-to-income ratio at the same time.
Educational information only, not a commitment to lend. Program terms vary by lender and are subject to credit approval. Figures reflect 2026 program limits. Sources: FHFA, HUD, VA, CFPB, California DRE. Sponsored by Save Financial, Inc. (NMLS #377740). California DRE #01875766. Equal Housing Lender.
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