A poor score narrows your options. It does not close them — and the programmes most people are told to rule out are often the ones still open.
"Bad credit" is not a single thing. A 640 with clean recent history is a different proposition from a 640 with a missed payment last month, and lenders treat them differently.
Here is what is genuinely available, in order of how far down the score scale each goes.
FHA publishes explicit tiers:
| Score | Down payment |
|---|---|
| 580 or above | 3.5% |
| 500 – 579 | 10% |
| Below 500 | Not eligible |
This is the most credit-tolerant of the mainstream programmes, and it is why FHA exists.
The trade-off is real and should be understood before you sign. At 3.5% down you are at 96.5% loan-to-value, and FHA's annual mortgage insurance premium then lasts for the life of the loan. It does not cancel at 80% equity the way conventional PMI does. The only exit is refinancing out of FHA — which requires the credit to qualify for a conventional loan later.
That is not a reason to avoid FHA. It is a reason to plan for refinancing once your credit recovers.
If you are an eligible veteran, service member or qualifying surviving spouse, the VA sets no minimum credit score at all.
Any number you are quoted is that lender's overlay. This matters enormously for a veteran with damaged credit: a decline from one lender is not a decline from the programme. Lenders that do high VA volume are often comfortable well below where a generalist lender stops.
VA also requires no down payment and no monthly mortgage insurance. For an eligible borrower with poor credit, it is almost always the first door to try.
USDA states plainly that it does not have a specific minimum credit score. Files run through GUS, which returns Accept, Refer, or Refer with Caution — and a Refer goes to manual underwriting, not to a decline.
Constraints: the property must be in an eligible rural area, and household income limits apply. Many people assume "rural" excludes them when it does not — the eligible map is broader than the word suggests.
Fannie Mae's Desktop Underwriter sets no minimum score for automated approvals, assessing the file holistically. Manually underwritten loans require 620 fixed-rate and 640 adjustable.
In practice, conventional lending with damaged credit means higher pricing and a stronger file elsewhere — more down payment, lower debt-to-income, more reserves.
Underwriting weighs a lot more than the score:
A file with a 590 score, no lates for two years, a 28% debt-to-income ratio and six months of reserves is a far better prospect than a 640 with a recent late and a 50% ratio.
Two things to be wary of when your credit is poor and you are being told yes.
Anyone asking for an upfront fee to "guarantee" approval. Legitimate lenders charge at application and closing, disclosed on the Loan Estimate. They do not charge for a promise.
A payment you cannot comfortably afford. If the numbers only work on the assumption of a raise, a refinance, or renting out a room, the loan is riskier than it looks. Foreclosure damages credit far more than waiting a year does.
You are entitled to a Loan Estimate after applying, and a Closing Disclosure at least three business days before closing. Read both. The three-day window exists so you can.
Six to twelve months of deliberate work often moves a borderline file into approval: