Home Loans With Bad Credit: Simple Guide to Still Get Approved

If your credit is less than perfect, you might think getting home loans with bad credit is impossible. Maybe you had late payments, collections, or even a past bankruptcy. The truth? Many people buy homes every year with bruised credit. You need the right loan program, the right lender, and a smart plan.

In this guide, we’ll explain how home loans with bad credit work, what “bad credit” really means, and what to do if your scores are in the 500s or low 600s. We’ll also cover options for a home loan with 580 credit scores, a home loan with under 620 FICO credit scores, and other popular programs that help buyers with less-than-perfect credit.

Key Takeaways About Home Loans With Bad Credit

• You can still qualify for home loans with bad credit if you pick the right program and lender.
• FHA and VA loans are often the best starting point for home loans with bad credit.
• If you’ve got a credit score of 580, you might be able to snag an FHA loan with a small down payment.
• A home loan with a credit score under 620 is still possible with flexible lenders and a strong file.
• Cleaning up recent late payments, lowering card balances, and documenting your income can make home loans with bad credit much easier to approve.

What Does “Bad Credit” Mean for a Home Loan?

Every lender looks at credit a little differently, but most use FICO scores:

• 740 and higher – excellent credit
• 700–739 – good credit
• 660–699 – fair credit
• 620–659 – below average
• Below 620 – often called “bad credit.”

If you fall below 620, you’re in the “bad credit” range for many banks. That does not mean you cannot qualify for home loans with bad credit. It simply means you need the right loan type and may require stronger income, a larger down payment, or additional documentation.

Lenders also look at what’s actually on your report, not just the number:

• Recent late payments
• Charge-offs and collections
• Repossessions and auto loan lates
• Bankruptcy or foreclosure
• High credit card balances

Even with these issues, home loans with bad credit are still possible if the rest of your file is strong and you work with a lender that specializes in helping bad credit borrowers, like Gustan Cho Associates.

Types of Home Loans With Bad Credit

Not all mortgages are friendly to those with low credit scores. Some programs are built for buyers with past credit problems. Here are the most common home loans available to those with bad credit.

FHA Home Loans With Bad Credit

FHA loans are one of the most popular home loan options for those with bad credit, as they are insured by the Federal Housing Administration. Many lenders can approve:

• If you’ve got a 580 credit score, you can snag an FHA home loan with just 3.5% down.
• FHA loans for some borrowers with 500–579 scores if they can put 10% down (depending on lender)
• Flexible rules on older collections and older late payments

FHA is often the best starting point if you need a home loan with bad credit and you’re a first-time or repeat homebuyer.

VA Home Loans With Bad Credit (For Eligible Veterans)

If you’re an eligible veteran, active-duty service member, or qualifying surviving spouse, VA loans can be a powerful option for home loans with bad credit:

• 0% down payment for many buyers
• More flexible credit rules than many conventional lenders
• No monthly mortgage insurance

Some lenders require a FICO credit score of 620 or higher, but others will review a home loan with a score under 620 if the rest of your file is strong and your recent payment history looks good.

USDA Home Loans With Bad Credit (Rural Areas)

USDA loans are made for folks with low to moderate incomes who want to buy homes in certain rural areas. They can sometimes work as home loans with bad credit, especially if:

• Your income is within USDA limits
• The property is in a USDA-eligible location
• You have a stable income and controlled debts

USDA loans can offer 0% down payment and competitive rates, even for buyers with scores in the low 600s.

Non-QM Home Loans With Bad Credit

Non-QM (non-qualified mortgage) loans are specialty home loans for borrowers with less-than-perfect credit and unconventional situations. They are often used by:

• Self-employed borrowers using bank statements for income
• Buyers with recent credit events (bankruptcy, foreclosure, short sale)
• Real estate investors using DSCR loans

Non-QM programs often allow home loans with credit scores in the 500s, but rates and required down payments are usually higher than those for standard FHA, VA, or conventional loans.

Home Loan With 580 Credit Scores

If you’re looking for a home loan with 580 credit score, you’re not alone. Many buyers fall right around this level. The good news is that a 580 FICO is often considered the “magic” number for FHA.

With a 580 score, you may qualify for:

• FHA home loan with a 580 credit score and 3.5% down
• More flexible debt-to-income ratio rules than many conventional loans
• The ability to roll some closing costs into the loan, where allowed

To improve approval chances for a home loan with a 580 credit score, focus on:

1. Clean recent history – Try to avoid any new late payments in the last 12 months.
2. Lower credit card balances – Bringing revolving balances under 30% of the limit can sometimes give a quick score boost.
3. Stable income and job history – Two years in the same line of work helps a lot.

A strong file with a 580 score can often qualify for home loans with bad credit, provided the lender has experience with FHA and borrowers with poor credit.

Home Loan With Under 620 FICO Credit Scores

Maybe your score is 600, 610, or 615, and you keep hearing that lenders want 620. A home loan with an under 620 FICO credit score is still possible if you choose the right strategy.

Here’s how lenders might review a home loan with under 620 FICO credit scores:

• FHA loan – Many lenders approve FHA buyers with credit scores in the 580–619 range.
• VA loan – Some VA lenders go below 620 if your recent payment history is strong.
• Non-QM loan – Can help if you have recent major credit events or very unique income.

With a home loan with under 620 FICO credit scores, the lender will look closely at:

• Your rent or housing payment history
• Your job and income stability
• Your savings, reserves, or down payment funds
• Any trend of improving credit over the last year

The stronger these pieces are, the easier it is to qualify for home loans with bad credit in the low 600s.

How Lenders Look at Your Complete File

Lenders do not just look at your score. When they review home loans with bad credit, they look at your whole story: your credit history, your income, your debts, and the home you want to buy.

You can make any bad credit file stronger by:

• Cleaning up errors and setting up auto-pay on all accounts
• Paying credit cards down as much as possible
• Avoiding new loans and credit cards before closing
• Saving for a solid down payment and a small cash cushion after closing

Small changes in these areas can transform a marginal file into a strong approval, even for buyers with poor credit who need home loans.

Case Study: How Gustan Cho Associates Helped a Buyer Get a Home Loan With a 580 Credit Scores

Let’s examine a simple real-life example of how Gustan Cho Associates assists with home loans for individuals with bad credit.

Maria’s situation

• First-time home buyer
• Middle FICO score: 582
• A few late credit card payments from two years ago
• Three small medical collections
• Strong job history with steady overtime income

Her local bank advised her to wait until her scores were over 640. She felt stuck and thought home loans with bad credit were out of reach.

How Gustan Cho Associates Helped

Maria came across Gustan Cho Associates while looking for a home loan with her 580 credit score. She spoke with a loan officer who specializes in home loans with bad credit. Instead of saying “no,” the loan officer looked at the whole picture:

• They pulled a full credit report and confirmed her 582 middle score.
• They reviewed her income and saw she had a stable job with two years of steady overtime.
• They suggested paying down one credit card to drop her utilization and setting up auto-pay on all accounts.
• They verified 12 months of on-time rent with a letter from her landlord and bank statements.

Within about 45 days, Maria’s score rose to 595. Gustan Cho Associates used FHA guidelines to approve a home loan with 580 credit scores and a 3.5% down payment. Her small, older medical collections did not have to be paid off because of how the guidelines work and how the underwriter viewed her overall risk.

Maria closed on her first home with a monthly payment close to what she had been paying in rent. This case demonstrates how the right lender, who understands home loans for individuals with bad credit, can turn a “no” into a “clear to close.”

Why Choose Gustan Cho Associates for Home Loans With Bad Credit?

There are many lenders available, but not all of them truly understand home loans for individuals with bad credit. Gustan Cho Associates specializes in assisting borrowers who have been rejected elsewhere.

Here’s why buyers choose Gustan Cho Associates for home loans with bad credit:

• Deep experience with FHA, VA, USDA, and Non-QM loans for lower credit scores
• No lender overlays on many government and conventional loans, meaning they often follow the actual agency guidelines instead of adding extra rules
• File-by-file review – they look at your whole story, not just your credit score.
• Clear game plan – a simple guide to help you get a home loan even if your credit score is around 580 or under 620.
• Creative solutions for self-employed borrowers, recent credit events, and higher debt-to-income ratios

If you want a lender that fights for approvals instead of looking for reasons to deny, Gustan Cho Associates is a strong choice for home loans with bad credit.

Final Thoughts and Call to Action

Bad credit does not mean you must rent forever. With the right strategy, you can still qualify for home loans with bad credit, even if you need a home loan with 580 credit scores or a home loan with under 620 FICO credit scores.

Focus on three things:

1. Choose the right loan program for your score and situation.
2. Work with a lender that truly understands home loans for individuals with bad credit and offers flexible options.
3. Follow a clear plan to improve your file before and during the loan process.

If you’re ready to see what’s possible, reach out to Gustan Cho Associates today. Their team specializes in home loans for individuals with bad credit and will review your whole financial story, not just your credit score.

Call Gustan Cho Associates at 800-900-8569, or email alex@gustancho.com to apply online and start your pre-approval.

Your past does not have to control your future. With Gustan Cho Associates on your side, home loans with bad credit can move from “maybe someday” to “you are clear to close.”

Frequently Asked Questions About Home Loans with Bad Credit:

Can I Really Get Home Loans with Bad Credit?

Yes. Many lenders offer home loans to borrowers with bad credit through FHA, VA, USDA, and Non-QM programs. You may need a bigger down payment or more paperwork, but it is still possible.

What Credit Score is Considered “Bad” for a Home Loan?

Most lenders see anything under 620 as “bad” or weaker credit. But you can still get home loans with bad credit if the rest of your file (income, job, down payment) looks good.

Can I Get Home Loans with Bad Credit if My Score is 580?

Yes. A home loan with a credit score of 580 is often possible with an FHA loan. Many buyers get approved for home loans with bad credit at 580 with 3.5% down and a stable income.

What if My Credit Score is Under 620?

You may still qualify for a home loan with 620 FICO credit scores if you use FHA, VA, or certain Non-QM loans. Lenders that specialize in home loans for individuals with bad credit will consider your whole financial story, not just your credit score.

Do I Need a Big Down Payment for Home Loans with Bad Credit?

Not always. Some home loans for individuals with bad credit allow you to buy with a small down payment, such as 3.5% on FHA loans. But if your score is lower, a larger down payment can make approval easier.

Will Old Collections or Medical Bills Stop Me from Getting Home Loans with Bad Credit?

Not always. Many programs for home loans with bad credit allow older or small collections, especially those related to medical expenses. A lender will review what they are, their age, and how they affect your approval.

Can I Get Home Loans with Bad Credit After Bankruptcy or Foreclosure?

Yes, after specific waiting periods. Once enough time has passed and your credit has improved, you can get home loans with bad credit again. FHA, VA, and Non-QM lenders often help in these situations.

What are Some Ways I Can Boost My Chances of Getting a Home Loan Even with Bad Credit?

You can boost your chances by paying all bills on time, lowering credit card balances, avoiding new loans, and saving for a down payment. These steps make home loans with bad credit much easier to approve.

Are Interest Rates Higher on Home Loans with Bad Credit?

Usually, yes. Lenders charge more for risk, so home loans with bad credit often have higher rates than loans for perfect credit. But many borrowers still save money compared to renting or using hard money loans.

Why Should I Use Gustan Cho Associates for Home Loans with Bad Credit?

Gustan Cho Associates specializes in home loans with bad credit. They work with FHA, VA, USDA, and Non-QM programs, have fewer additional rules than many banks, and assist borrowers who were previously turned down elsewhere.