We get asked these kinds of questions a lot. Buying a house with a credit score of 540 may seem tough, but it’s not impossible! Many people with less-than-perfect credit are still able to achieve their dream of homeownership. You just need the right plan, and this guide will help you get started.
Understand Your Credit Score
A credit score under 579 is considered “poor” by most lenders. But don’t let that discourage you! Your credit score is just one piece of the puzzle. Lenders also look at your income, debt, and down payment. Some loan programs are more flexible about credit scores, so you still have options.
Explore Loan Options
Here are a few loan programs that may work for you:
FHA Loans
Backed by the Federal Housing Administration.
You may qualify with a score as low as 500 if you have a 10% down payment.
A smaller down payment (3.5%) is possible if your score is at least 580.
VA Loans
Available to veterans, active-duty military, and their families.
Credit score requirements are often more flexible.
USDA Loans
Designed for rural and suburban areas.
Some lenders allow lower credit scores, but requirements can vary.
Subprime Loans
These are special loans for borrowers with low credit scores.
They may have higher interest rates, but they can help you get started.
Save for a Down Payment
A larger down payment can make lenders more likely to approve you, even with a low credit score. Start saving now!
Improve Your Credit
While you can still buy a house with a 540 credit score, improving it will make the process easier and could save you thousands in interest. Here’s how:
Pay bills on time.
Pay down credit card balances.
Check your credit report for mistakes.
Get Preapproved
The best way to know what you qualify for is to get preapproved. Preapproval shows sellers and real estate agents that you’re serious about buying a home. Plus, it gives you a clear picture of your budget. It's painless and the easiest first step you can take.
Click below to start your preapproval process—it only takes a few minutes, and there’s absolutely no obligation!