HOME BUYING
From Listings to Living
Say your middle credit score is 591. You had a Chapter 7 bankruptcy discharged in the spring of 2024, you have paid every bill on time since, and you are tired of renting. One bank turned you down in a five-minute phone call. Is that the end of it?
Usually not. Loans with a bad credit history exist across every major program, and the published floors are lower than many buyers assume. FHA insures loans down to a 500 score, VA sets no minimum of its own, USDA lets its automated system weigh the score, and in November 2025 Fannie Mae dropped the fixed minimum score for loans run through its Desktop Underwriter system. What blocks most borrowers is the calendar. Each program sets a waiting period after a bankruptcy or foreclosure, and those periods range from about one year to seven.
Two caveats. Program minimums are not lender minimums: individual lenders often add stricter rules, called overlays. And a lower score rarely means the same price. Expect a bigger down payment, a higher rate or added fees, and run the full cost before you sign.
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The table below shows what each program publishes. Lenders can and do set their own floors above these.
| Program | Published credit score rule | What it means for a low score |
|---|---|---|
| FHA | 580 or higher for maximum financing; 500 to 579 capped at 90 percent loan-to-value; below 500 ineligible | 3.5 percent down at 580, 10 percent down from 500 to 579 |
| VA | VA does not require a minimum credit score; lenders may set one | Shop lenders; floors vary |
| USDA guaranteed | The agency's automated system (GUS) determines the acceptable score; manual files use the middle of three scores | A lower score can push the file to manual review |
| Conventional (Fannie Mae) | No minimum for Desktop Underwriter casefiles; manually underwritten loans need 620 (fixed rate) or 640 (ARM) | Approval possible, but loan-level price adjustments rise as scores fall |
HUD's Single Family Housing Policy Handbook 4000.1 uses a Minimum Decision Credit Score: the middle of three bureau scores, or the lower of two. At 580 or above, you are eligible for maximum financing. Between 500 and 579, the loan cannot exceed 90 percent of the home's value. Below 500, you are not eligible. Our guide on how to qualify for an FHA mortgage covers the debt ratios and income rules that sit on top of the score.
VA's own home loan overview says VA does not require a minimum credit score, while a lender may set a credit score limit. In practice, eligible veterans and service members with damaged credit should ask several VA lenders for their floor in writing, because the answer differs from one lender to the next.
USDA's handbook chapter on credit analysis leaves the acceptable score to GUS for automated recommendations. If GUS refers the file to a human underwriter, the lender takes the middle of three scores or the lower of two. The property also has to sit in an eligible rural area. A buyer looking around Montana City, Montana, for example, would enter the specific address on USDA's eligibility site before counting on this program.
For years, 620 was the number people quoted for a conventional loan. Fannie Mae's Selling Guide section on credit scores now says a minimum credit score is not required for loan casefiles run through Desktop Underwriter, which assesses creditworthiness through its own analysis of the credit report. The guide lists Announcement SEL-2025-09, issued November 5, 2025, among the updates to that section. Manually underwritten loans still need 620 for a fixed rate and 640 for an adjustable rate.
Three limits keep this from being a free pass. DU still has to return an approval. Lenders can keep a 620 overlay. And the same guide says loan-level price adjustments are assessed based on the representative credit score, so a lower score usually costs more in rate or points. A low down payment conventional loan also carries private mortgage insurance; our explainer on PMI meaning and cost shows how that premium works and when it ends.
A 640 score with a foreclosure 18 months ago can be harder to place than a 590 score with a clean history, because that foreclosure still fails FHA's three-year rule, USDA's 36-month line and Fannie Mae's seven-year standard. Each program measures the gap differently:
| Event | FHA | VA | USDA | Fannie Mae |
|---|---|---|---|---|
| Chapter 7 bankruptcy | 2 years from discharge; 12 months with extenuating circumstances | Generally not within 12 months; 1 to 2 years only with re-established credit and circumstances beyond your control | 36 months; sooner with a GUS Accept or a documented credit exception | 4 years; 2 with extenuating circumstances |
| Chapter 13 bankruptcy | 12 months of on-time plan payments plus court permission | 12 months of satisfactory payments plus trustee or judge approval | 12 months of the plan elapsed, on-time payments and court or trustee permission on referred files | 2 years from discharge; 4 years from dismissal |
| Foreclosure | 3 years; exceptions for documented extenuating circumstances | Analyzed the same way as a bankruptcy | 36 months; sooner with a GUS Accept or a credit exception | 7 years; 3 with extenuating circumstances and limits on loan-to-value |
Sources and fine print, program by program:
The practical takeaway: write down the exact discharge, dismissal or title transfer date from your court or county records. Lenders count from that date, and being a month short gets the same denial as being a year short.
Low score, little cash, clean recent history. FHA is the usual fit. A 580 score gets 3.5 percent down, and the mortgage insurance premium does not change with your score. Our guide to what an FHA loan is covers the premium math and when FHA beats conventional. If you plan to buy where association dues are high, read how HOA fees affect your mortgage, because dues count against your debt ratio.
Eligible for VA. No program minimum, no monthly mortgage insurance, and waiting periods judged on your circumstances rather than a fixed table. Lender floors still vary, so compare.
Rural address, moderate income. USDA's guaranteed program limits both where the home sits and how much the household earns, and its credit review leans on the automated system rather than a fixed score.
Score in the 600s, larger down payment. A conventional loan through DU may approve, priced for the risk. Compare it side by side with FHA.
Taking over a seller's loan. FHA and VA loans can often be assumed (yes, a non-veteran can assume a VA loan), but the servicer still reviews your credit and income. Our guide to assumable mortgage listings explains how that review works.
For a side-by-side view of every program, including jumbo loans and ARMs, see our overview of the types of mortgage loans.
Here is an illustrative example, with numbers chosen to show the logic rather than to quote a market. A nurse in Detroit with a 591 score and a Chapter 7 discharged 26 months ago clears FHA's two-year rule and its 580 tier today, but is still more than a year short of Fannie Mae's four-year standard. FHA is the realistic path now; conventional becomes an option after the four-year mark if her score keeps rising.
When no agency program fits, the remaining loans with a bad credit history usually come from non-QM lenders. A Qualified Mortgage, as the CFPB explains in its plain-language guide, avoids risky features such as interest-only periods, negative amortization, balloon payments and terms longer than 30 years, and most QMs face limits on APR and on upfront points and fees. FHA, VA and USDA loans count as qualified loans. A non-QM loan sits outside that definition, so those price and feature limits do not protect you.
Non-QM is not automatically predatory. Every lender must still make a good-faith effort to determine that you can repay. But the trade is real: the CFPB describes a subprime mortgage as one carrying a higher interest rate than prime loans, says subprime loans are more often adjustable-rate, and warns that the rate on an ARM can rise significantly over time. The same page makes a point worth repeating: being offered a subprime loan does not mean you would not qualify for a prime loan with another lender, or for an FHA loan.
Some long-term products also live in this space. Our analysis of the 40-year mortgage shows why stretching the term can lower the payment while raising lifetime interest.
If you see any of these, stop and get a second quote. A HUD-approved housing counseling agency can review the offer with you, and a real estate attorney can read the note before closing.
Rebuilding credit to buy a house is mostly time plus a clean record, which matters more than what age you can buy a house. The regulation for VA loans states the principle plainly: outside of bankruptcy, satisfactory credit is generally considered re-established after 12 months of satisfactory payments following the last derogatory item. The other programs use longer clocks.
| When | What to do | Why it matters |
|---|---|---|
| Month 0 | Pull all three credit reports, dispute errors, list discharge and transfer dates | Errors and missing dates delay underwriting |
| Months 1 to 12 | Pay every account on time; keep card balances low; avoid new debt | 12 months of clean payments is the VA benchmark and the FHA Chapter 13 minimum |
| Year 2 | Ask two or three FHA lenders for preapproval | FHA's Chapter 7 standard is two years from discharge |
| Year 3 | Re-test FHA after a foreclosure; test USDA if the address and income qualify | FHA and USDA foreclosure lines sit at three years |
| Year 4 | Compare conventional against FHA | Fannie Mae's Chapter 7 standard is four years |
| Year 7 | Conventional after foreclosure without exceptions | Fannie Mae's foreclosure standard is seven years |
While you wait, housing still has to work. Our guides to apartments with no credit check and to second chance housing cover rentals that screen differently. Some buyers try a lease-option instead; read our breakdown of rent to own homes first, because the contract decides what happens to your option fee if financing still fails at the end.
When the date arrives, start with a real preapproval rather than an online estimate. Our guide to mortgage pre approval lists the documents lenders ask for and how credit pulls work. A buyer with a recent credit event in Houston, for instance, can ask each lender to state its overlays in writing, then compare Loan Estimates issued the same day.
The next step after this page is a conversation with a loan officer or a HUD-approved housing counselor, who can read your actual reports. If you are house hunting in Charlotte or anywhere else, shortlist homes on Leevli listings in the price range your preapproval supports.
Credit decides whether you can borrow; the building and its association decide whether a lender will finish the deal, and residents know how that went for recent buyers.
Listings show the property, but they rarely explain the lived reality around it. On Leevli, a mover can explore the city, review neighborhood and building information, and ask a verified resident the specific questions that remain unanswered. That human layer helps readers know what to investigate before signing a lease, making an offer, or choosing between two addresses.
Yes, once the program's waiting period has passed. FHA generally requires two years from a Chapter 7 discharge, or 12 months of on-time payments with court permission during a Chapter 13 plan. Fannie Mae requires four years after Chapter 7 and two years after a Chapter 13 discharge. USDA treats a discharge more than 36 months old as no longer adverse.
It depends on the program. FHA's floor is 500, with 3.5 percent down available from 580. VA sets no minimum, though lenders may. Fannie Mae requires no minimum for Desktop Underwriter loans but keeps 620 for manually underwritten fixed-rate loans and 640 for adjustable-rate loans. Lender overlays often sit above all of these.
For loans run through Desktop Underwriter, yes. Fannie Mae's Selling Guide now says no minimum score is required for DU casefiles, an update listed under Announcement SEL-2025-09 from November 5, 2025. DU still has to approve the file, lenders may keep their own 620 floor, and price adjustments still rise as scores fall.
Generally three years for FHA, measured from the date title transferred, and 36 months for USDA unless the automated system accepts the file sooner. Fannie Mae requires seven years, or three years with documented extenuating circumstances and a lower maximum loan-to-value. VA analyzes a foreclosure the same way it analyzes a bankruptcy, case by case.
Try lenders that actively originate FHA, VA or USDA loans, credit unions, and mortgage brokers who can compare several lenders' overlays. A denial from one bank says little about the program rules. Ask each lender to state its minimum score and waiting periods in writing before you pay for an appraisal.
Non-QM loans fall outside the federal Qualified Mortgage definition, which limits risky features such as interest-only payments, balloons and terms over 30 years, and caps pricing on most loans. They can be legitimate, especially for unusual income, but they usually cost more. The common mistake is accepting one without first testing whether FHA would approve you.
Higher-priced lending for borrowers with impaired credit still exists, including among some lenders that offer non-QM loans above the Qualified Mortgage price limits. The CFPB describes subprime loans as carrying higher rates than prime loans and notes they are more often adjustable. It also points out that an offer of a subprime loan does not mean you would not qualify for prime or FHA financing elsewhere.
Plan on at least 12 months of on-time payments after your last late payment or collection, which is the VA benchmark for re-established credit. After a Chapter 7, the realistic horizon is two years for FHA and four for Fannie Mae. After a foreclosure, three years for FHA and USDA and up to seven for conventional.
Usually. Fannie Mae assesses loan-level price adjustments based on the representative credit score, which shows up as a higher rate or added points. FHA's annual mortgage insurance premium does not change with your score, which is one reason FHA often beats conventional for borrowers in the 500s and low 600s. Compare same-day Loan Estimates for both.
Not on FHA. HUD takes each borrower's decision score and uses the lowest one, so a strong co-borrower does not lift a 560 into the 3.5 percent tier. Fannie Mae's manual underwriting uses an average median score for multiple borrowers, which works differently. Ask the lender how its program treats joint applications before adding anyone.
This article is informational and does not constitute legal, financial, tax or insurance advice.
