Getting a Mortgage With Poor Credit

Mortgage lending is the one corner of consumer credit where a low score does not automatically mean no. Three federal programs were built for this exact situation. Each has published rules a borrower can read. What those rules say is narrower than the marketing around them. And the score a mortgage lender sees is usually not the one on a phone app.

Key points

• HUD's own rule has three tiers. A minimum decision credit score under 500 is not eligible. From 500 to 579, the cap is 90% loan-to-value. At 580 and above, maximum financing applies, which pairs with FHA's 3.5% minimum required investment.
• VA's Buyer's Guide states VA does not require a minimum credit score and that lenders set their own, commonly around 620. USDA's program page says the guaranteed loan program "has no credit score requirements."
• A 640 USDA cutoff is a lender overlay, not an agency rule. USDA's Chapter 10 credit guidance turns on the automated underwriting recommendation, not on a score threshold.
• FHA measures its bankruptcy and foreclosure waiting periods to the FHA case number assignment date, not the application or closing date.
• Mortgage underwriting uses older "classic" FICO versions ordered from all three bureaus, and the qualifying score is the middle of three — then the lowest across all borrowers.
• Free help exists. HUD says foreclosure, eviction, and homeless counseling from participating agencies is always free, and other counseling fees must be waived for anyone who cannot afford them.

FHA: the 580 and 500 structure

Minimum decision credit score	Maximum loan-to-value	Practical down payment
580 and above	Maximum financing	3.5% minimum required investment
500 to 579	90%	10%
Under 500	Not eligible for FHA-insured financing	Not applicable

Where three scores are reported, FHA takes the median. Where two differing scores come back, it takes the lower. Where there are several borrowers, the lender uses the lowest of their minimum decision credit scores.

VA and USDA: no agency score minimum, real underwriting anyway

That is genuinely different from FHA, and it is widely misreported. Neither program sets a number. Both push the decision to underwriting. So documents and explanation carry more weight than any single figure.

• VA loans have no down payment requirement in the standard case, and no monthly mortgage insurance. They carry a one-time funding fee instead. For a purchase with less than 5% down, the fee is 2.15% on a first use and 3.3% after first use; 5% down drops it to 1.5% and 10% down to 1.25%. The fee is waived in several listed cases. Those include veterans receiving VA compensation for a service-connected disability. They also include people eligible for it who take retirement or active duty pay instead, and surviving spouses receiving DIC.
• USDA guaranteed loans offer 100% financing on 30-year fixed terms in eligible rural areas, with household income capped at 115% of area median income. The often-quoted 640 threshold does not appear in USDA's Chapter 10 credit analysis guidance. What the chapter says is simpler. Files that get a GUS Accept need no credit score validation. Refer, Refer with Caution, and manually underwritten files need a validated score with two qualifying tradelines.

Program	Agency minimum score	Down payment	Ongoing insurance or fee	Property or borrower limits
FHA	580 for maximum financing; 500 with 10% down	3.5% at 580+; 10% at 500–579	Upfront 1.75% plus annual 0.15%–0.75%	Owner-occupied; FHA loan limits apply
VA	None set by VA	Typically none	One-time funding fee on a purchase, 1.25%–3.3% by use and down payment; exemptions apply	Eligible service, veteran, or surviving spouse status
USDA guaranteed	None set by USDA	None	Guarantee fees set by USDA	Eligible rural area; income at or below 115% of area median
Conventional (Fannie Mae)	620 representative score for loans insured or guaranteed by a federal agency; no minimum for many automated approvals	Varies	Private mortgage insurance above 80% LTV	Standard eligibility matrix

Waiting periods after bankruptcy, foreclosure, or a short sale

Event	FHA	Conventional (Fannie Mae)	Fannie Mae with extenuating circumstances
Chapter 7 bankruptcy	2 years from discharge; under 2 years but not under 12 months may be acceptable with documented extenuating circumstances	4 years	2 years
Chapter 13 bankruptcy	12 months of the payout period elapsed, with satisfactory payment performance and written court permission	2 years from discharge; 4 years from dismissal	2 years from discharge; 2 years from dismissal
Multiple bankruptcies	Evaluated case by case under the same rules	5 years if more than one filing in the past 7 years	3 years from the most recent discharge or dismissal
Foreclosure	3 years from the date title transferred	7 years	3 years, with added limits in years 3 through 7
Deed-in-lieu	3 years from title transfer, grouped with foreclosure	4 years	2 years
Short sale (preforeclosure sale)	3 years, with an exception where the borrower was current for the 12 months before the sale	4 years	2 years

Two details in that table are where consumer articles usually go wrong. Both are worth stating plainly:

1. FHA clocks run to case number assignment. Not to application, not to closing. The case number is pulled early. So the date to plan around is earlier than most borrowers assume.
2. FHA groups deed-in-lieu with foreclosure, not with short sale. Both carry three years. But the short-sale rule has its own escape hatch. It is open to borrowers who were current on every mortgage and installment payment for the 12 months before the sale. Foreclosure and deed-in-lieu do not get that path. They only get documented extenuating circumstances.

Fannie Mae adds two points. No exceptions are permitted to the two-year wait after a Chapter 13 discharge. And two borrowers with separate bankruptcies are not cumulative; they do not add up to "multiple bankruptcies." Rebuilding during the wait is the real work. Our rebuilding after bankruptcy guide covers the sequence.

Manual underwriting and compensating factors

A file referred out of automated underwriting is not a declined file. It is a file that needs explaining. What underwriters can credit is what a borrower can document:

What the mortgage insurance actually costs

That duration rule is the expensive part. It also gives the 500-to-579 tier a hidden consolation prize. A borrower putting 10% down lands at exactly 90% LTV. There the annual premium ends after 11 years instead of running for the life of the loan.

Program	Upfront cost	Ongoing cost	Does it ever end?
FHA, LTV above 90%	1.75% of base loan amount	Annual MIP, 0.15%–0.75% by loan size and term	No — runs for the mortgage term
FHA, LTV at or below 90%	1.75% of base loan amount	Annual MIP, 0.15%–0.75%	Yes — 11 years
VA	Purchase funding fee, 1.25%–3.3%; exemptions apply	None	Not applicable, there is no monthly mortgage insurance

These FHA figures come from HUD Mortgagee Letter 2023-05. It applies to case numbers endorsed on or after March 20, 2023. The letter also ties the loan-size threshold that splits the rate tiers to the national conforming loan limit. That limit moves every year. So the exact tier a given loan falls into is a question for the lender.

Why the lender's score is not the score on your app

1. The tri-merge pull

   Fannie Mae's guide requires the lender to request those classic FICO scores from each approved provider when ordering the three in-file merged credit report. Free consumer apps typically show a different, newer model, which is why the numbers rarely match.

2. One score per borrower

   With three scores, the middle one is used. With two, the lower one is used. If two of three are identical, that repeated value is the middle.

3. One score per loan

   Where there are multiple borrowers, the lender determines each borrower's applicable score and then selects the lowest of the group as the representative credit score for the loan. It is the lowest across everyone, not an average.

For a couple buying together, the result is blunt. The qualifying score is the weaker borrower's. Whether both incomes are needed, and whether one borrower makes a stronger file, is worth raising with the loan officer before the application.

How much the score band actually changes the rate

FICO band	30-year fixed rate shown
780 and above	6.89%
760 to 779	6.96%
740 to 759	7.03%
720 to 739	7.14%
700 to 719	7.18%
680 to 699	7.29%
660 to 679	7.32%
640 to 659	7.43%
620 to 639	7.58%

Those figures are a single dated snapshot, not a forecast. The calculator draws its data from Curinos LLC. It labels the rates as of September 4, 2026, and refreshes them daily. The same tool put the gap between the top and bottom bands at about $140 a month, and $50,512 over the life of that loan. The bands stop at 620. That is part of the point: below 620, conventional pricing largely gives way to the government-insured programs above.

Free help that is genuinely free

HUD also requires agencies to disclose any fee before counseling begins. It bars them from tying counseling to buying a product from the agency, its affiliates, or its partners. Pre-purchase counseling from one of these agencies is close to an independent second opinion. For a first-time buyer whose score sits near a program cutoff, it is a natural first call.

Common mistakes to avoid

• ✕Treating one lender's denial as FHA policy. Lender overlays sit above HUD's floor, and they vary widely between lenders.
• ✕Counting an FHA waiting period from the application date. FHA measures to the case number assignment date, which comes earlier.
• ✕Believing USDA requires a 640 score. USDA states the program has no credit score requirement; 640 is a common lender overlay.
• ✕Assuming the score in a free app is what the lender will see. Mortgage files use older classic FICO versions pulled from all three bureaus.
• ✕Expecting an average of two borrowers' scores. The representative score is the lowest across all borrowers on the loan.
• ✕Overlooking that FHA annual mortgage insurance runs for the full loan term at any LTV above 90%.
• ✕Opening a card or financing furniture between preapproval and closing, when many lenders re-pull the file before funding.
• ✕Paying a company that promises an approval. No one can promise a mortgage approval; underwriting decides each file on its own facts.

Frequently asked questions

What credit score do I need for an FHA loan?

HUD's rule sets three tiers by minimum decision credit score. A score under 500 is not eligible for FHA-insured financing. A score of 500 to 579 is limited to 90% loan-to-value, meaning at least 10% down. A score of 580 or above is eligible for maximum financing, which works with FHA's 3.5% minimum required investment. Individual lenders may require more.

Can I get a mortgage with a 500 credit score?

FHA permits it at 90% loan-to-value, which means a 10% down payment, and HUD's guidance says financing is not available at all under 500. Whether a specific lender will write that loan is a separate question, since many set their own floor at 580 or higher. Shopping multiple FHA-approved lenders is how borrowers find the ones that go to the published floor.

Does the VA require a minimum credit score?

The VA Home Loan Guaranty Buyer's Guide states that VA does not require a minimum credit score, and that lenders typically want a minimum, commonly around 620 unless there is a large down payment. It also encourages shopping around, because different lenders have different requirements. VA loans carry a one-time funding fee instead of monthly mortgage insurance.

Do USDA loans require a 640 credit score?

No. USDA's Single Family Housing Guaranteed Loan Program page states the program has no credit score requirements, while expecting applicants to demonstrate willingness and ability to manage debt. The 640 figure is a common lender overlay. USDA's own credit chapter turns on the automated underwriting recommendation, requiring a validated score for Refer and manually underwritten files.

How long after bankruptcy can I get a mortgage?

It depends on the program and chapter. FHA generally requires two years from a Chapter 7 discharge. A shorter path of not less than 12 months exists where extenuating circumstances are documented. Chapter 13 needs 12 months of payout plus court permission. Fannie Mae requires four years from Chapter 7, or two with extenuating circumstances, and two years from a Chapter 13 discharge.

How long after a foreclosure can I buy again?

FHA generally makes a borrower ineligible for three years from the date title transferred in a foreclosure or deed-in-lieu, with an exception for documented extenuating circumstances beyond the borrower's control. Fannie Mae's conventional waiting period is seven years after foreclosure, or three years with extenuating circumstances, with additional loan-to-value and occupancy limits applying in years three through seven.

Why is my mortgage score lower than the score in my app?

Because they are different models. Mortgage lenders order older classic FICO versions from each bureau, while consumer apps typically display a newer FICO or a VantageScore. The three bureau files also differ, so three scores are generated and the middle one is used. Where two or more borrowers apply, the lowest applicable score across the group qualifies the loan.

How much does FHA mortgage insurance cost?

Under HUD Mortgagee Letter 2023-05, effective for case numbers endorsed on or after March 20, 2023, the upfront premium is 1.75% of the base loan amount. The annual premium ranges from 0.15% to 0.75% depending on loan size, term, and loan-to-value. Above 90% loan-to-value the annual premium runs for the full mortgage term; at 90% or below it ends after 11 years.

Where can I get free help before applying?

HUD funds a national network of participating housing counseling agencies, reachable at 800-569-4287. Foreclosure, eviction, and homeless counseling is always free. Other counseling may carry a nominal fee, which HUD requires agencies to waive for clients who cannot afford it, and any fee must be disclosed before counseling begins. Agencies may not condition counseling on buying a product.

Does applying with several mortgage lenders hurt my credit?

Scoring models group rate-shopping inquiries for the same loan type made close together. Older FICO versions use a 14-day span, the newest FICO versions use 45 days, and FICO Scores also ignore mortgage inquiries made in the 30 days before scoring. Keeping the whole search inside 14 days fits every published window. Our hard inquiries guide has the detail.