To obtain a mortgage with bad credit, start by repairing your credit score through timely payments, reducing credit utilization, and disputing inaccuracies on your credit report. Consider a secured credit card or credit counseling for structured debt management. Explore government-backed loans like FHA or VA mortgages, which have lenient credit requirements and lower down payment thresholds. A co-signer with good credit can also help qualify. Prioritize a larger down payment (e.g., 10–20%) to reduce loan-to-value ratio and potentially qualify for conventional loans. Lenders may accept scores as low as 580 for FHA loans, while VA loans typically require no minimum score.

The effectiveness of these strategies stems from government programs designed to promote homeownership for credit-challenged borrowers. For example, FHA loans accounted for 7.1% of all U.S. home purchases in 2022, with an average FICO score of 670, according to the Mortgage Bankers Association. A 2023 Federal Reserve study found that borrowers with scores below 620 paid 1.5–2.0 percentage points more in interest rates compared to those with scores above 720. However, FHA loans allow scores as low as 500 with a 10% down payment, while VA loans offer 100% financing with no credit score minimum. A 20% down payment eliminates private mortgage insurance (PMI) and lowers monthly payments by 30–50%, as reported by the Consumer Financial Protection Bureau. Credit repair efforts, such as paying down credit card balances to below 30% utilization, can improve scores by 50–100 points within six months, per FICO’s research. Combining these measures increases approval chances and reduces long-term borrowing costs.