3 Ways to buy a house with bad credit

by Lynn Butterfield 01/08/2025

Your credit score matters to mortgage lenders, but that doesn’t mean it’s impossible to buy a house with bad credit. In addition to other loan options, there are other strategies for buying a home if your credit report is less than ideal.

Here are some of the ways you can work toward buying a house with bad credit:

Government subsidized loans

As an alternative to a conventional loan, the U.S. government offers various loan options for qualified borrowers wanting to buy a home. The three most recommended are FHA loans, USDA loans and VA loans.

FHA loans are offered by the Federal Housing Administration. An FHA loan is great for first-time homebuyers because of lower minimum credit score requirements and lower down payments.
USDA loans are paid for by the U.S. Department of Agriculture. This type of loan can help you buy a house or property in a qualified rural area.
VA loans are available from the Department of Veterans Affairs for active military personnel and veterans. These loans typically have a special one-time funding fee instead of a large down payment.

Private loans

Private loans are arranged between the borrower and a private individual lender rather than a mortgage company. Private mortgages typically exist between family members, friends or other personal connections. However, it’s not impossible to find a private mortgage lender on your own.

These types of loans can be much more forgiving when it comes to credit report, but might have other requirements per the individual lender.

Cash

While not always likely, it is possible to buy a house with cash rather than borrow money at all. Otherwise, another strategy for homebuyers with low credit scores is to supplement a mortgage with a cash payment.

For example, if a lender offers you a mortgage with a higher interest rate or higher down payment because of your credit, you can use cash to lighten the financial burden.

These options won’t work for every buyer, but they’re worth considering if you want to buy a house with a low credit score. Keep these strategies in mind when evaluating your financial situation and shopping for a loan.

About the Author

Lynn Butterfield

Lynn Butterfield is an Associate Broker at Coldwell Banker and is a Certified Real Estate Negotiator. Mr. Butterfield has 41 years of experience in real estate sales and development. His vast experience ranges from luxury sales through commercial sales and leasing. Perhaps more importantly, he focuses his attention on client success, whether he's helping someone buy their first home, or working with a developer seeking assistance to create and position a large project in the marketplace. One recent client said, "Working with Lynn is almost like working with a Real Estate Attorney, because he knows exactly what to look for, so you can be protected!" Another first-time home buyer just said, "I needed someone to hold my hand through this because it's the largest investment we'll ever make! I know he isn't in this just to make a quick buck. He really cares about his clients!"

Whether you're in the research phase at the beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having a real estate professional by your side. He would be honored to put his real estate experience to work for you.