Smart Money

How to buy a house with bad credit


May 18, 2023



min read

Buying a house with bad credit

Bad credit can be a major obstacle when trying to buy a house, as it can make it difficult to secure a mortgage or receive favorable loan terms. However, achieving homeownership with bad credit is not impossible. In this article, we'll discuss strategies and tips to help you navigate the home-buying process and increase your chances of getting approved for a mortgage, even with a less-than-perfect credit score.

Improve your credit score before applying

  1. Review your credit report: Identify any errors or inaccuracies that may be negatively affecting your credit score, and dispute them with the credit bureaus.
  2. Pay down existing debt: Lower your credit utilization by paying off outstanding balances on credit cards and other loans.
  3. Make timely payments: Consistently paying your bills on time demonstrates financial responsibility and can improve your credit score over time.

Save for a larger down payment

  1. Demonstrate financial commitment: A larger down payment can help offset the risk associated with lending to someone with bad credit.
  2. Lower your loan-to-value ratio: A smaller mortgage amount in relation to the value of the home can make it easier to secure a loan.
  3. Reduce your monthly mortgage payments: A larger down payment may mean lower monthly payments, making it more affordable to own a home.

Research loan options for buyers with bad credit

  1. Investigate FHA loans: These government-backed loans can offer more lenient credit requirements and lower down payment options for eligible borrowers.
  2. Explore VA loans: If you're a veteran or active-duty service member, you may qualify for a VA loan, which typically has more flexible credit requirements.
  3. Consider local first-time homebuyer programs: Occasionally, state and local governments may offer programs with more favorable loan terms for first-time buyers, including those with bad credit.

Get pre-approval for a mortgage

  1. Demonstrate financial stability: Pre-approval shows sellers that you're a serious buyer 
  2. Identify potential issues: The pre-approval process may highlight areas in your financial profile that need improvement before you can secure a mortgage.
  3. Strengthen your negotiating position: Being pre-approved can give you an advantage when negotiating with sellers, as it shows that you are one step closer to completing the purchase.

Work with a knowledgeable real estate agent

  1. Find an agent experienced with bad credit buyers: They can help you navigate the home-buying process and identify properties that may be more accessible to buyers with poor credit.
  2. Utilize their expertise: A skilled agent can help you craft a strong offer and negotiate with sellers on your behalf.
  3. Access additional resources: Your agent may have connections with mortgage lenders or other professionals who specialize in working with buyers with bad credit.

Be patient and persistent

  1. Be prepared for a longer search: Finding a home and securing a mortgage with bad credit may take more time and effort.
  2. Stay realistic about your options: Be prepared to make compromises on the type of home or location to secure a mortgage with bad credit.
  3. Keep working on your credit: Even after purchasing a home, continue to focus on improving your credit score to potentially refinance your mortgage at a better rate in the future.


While buying a house with bad credit can be challenging, it's not impossible. By taking proactive steps to improve your credit score, saving for a larger down payment, and exploring various loan options, you can increase your chances of achieving homeownership. Additionally, working with an experienced real estate agent and maintaining patience and persistence throughout the process can help you find the right home, even with a less-than-ideal credit history.

Additional information

Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.