How to Buy A House With Bad Credit But Good Income

This question, How to Buy a House with Bad Credit but Good Income, appeared on Quora a few days ago. My followers specifically asked me to answer the question. I believe you are also searching for the same way to buy a home with bad credit. Okay! I will be showing you the several options available for you to get your dream home despite having bad credit but a good income.


Although having bad credit is totally faulty, it does not spell doom for you. It is a fact known to all that most, if not all, credit institutions decline loans to applicants with bad credit scores. It might not be your fault that you have a bad credit score, but that’s the standard here today.

Notwithstanding, we will also show you the possible causes of a bad credit score and how to improve it to increase your chances of getting approved for a loan in the future.

So before we show you the possible ways to buy a house with bad credit but a good income, let’s take a quick look at what constitutes bad credit, how to qualify to buy a home with bad credit, and FHA loan requirements.

How to Buy A House With Bad Credit But Good Income

Basically, a credit score is a figure representing your credit worthiness. The figure is used to scale the level of how worthy you are based on reports from credit bureaus.

Financial lenders like banks, credit card companies, and mortgage lenders use the credit score tool to calculate the risk involved in giving out their funds to applicants. This is to reduce the rate of bad debts, which are usually irrecoverable.

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So the credit score predetermines if you are prequalified for a loan, the interest rate, and the exact amount that you can borrow. So if you have a high credit score above 600, you are most likely to get approved for home-buying loans from lenders.

But what about individuals with a low credit score of 500? Are they qualified for any loan at all? Yes, some mortgage lenders, especially FHA, give loans to individuals with bad credit with certain requirements.

Best Home loan lenders for Bad Credit: 500–579 Scores

A credit score value of 500 is bad credit, and it’s pretty hard to find mortgage lenders who give bad credit loans. Scotiabank and mortgage loans have their own bad credit score requirements. There are many lenders with bad credit.

You have to ask your mortgage lender to know their minimum credit score requirement for the loan. Let us consider a few mortgage lenders for individuals with a bad credit score of 500 or below;

  • First National Bank of America
  • Athas Capital Group
  • Citadel Servicing
  • Angel Oak Mortgage
  • Carrington Mortgage Services
  • Homebridge Financial
  • A&D Mortgage
  • FHA Loans
  • ACC Mortgage
  • VA Mortgage
  • USDA Loan

So you can consider any of the following mortgage lenders for your low credit loan to buy your house:.

Notwithstanding the options above, most individuals with a bad credit score usually prefer going with FHA loans.

What is the Bad credit? FHA Loan Program to Buy A House

The Federal Housing Administration (FHA) Loan is a loan system insured by the federal government and issued by mortgage lenders or the bank. Basically, for first-time home buyers. The major remedy of FHA loans is to assist low-income earners with their homes.

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This kind of low, unlike other conventional home buying loans like rocket mortgage home equity loans does not require a high credit score. It accommodates individuals with a bad credit score. So this is one of the most common ways to buy a house with bad credit but good income: apply for the FHA Loan

How does the FHA bad credit loan work?

When you apply for an FHA loan through your lender, your lender performs a qualification check for you. They check if you have a valid social security number, are a lawful resident of the U.S.A., and meet the legal age requirement. The most rigid check to be conducted is your financial history.


These are the minimum FHA loan requirements for bad-credit FHA loans. The requirements below are flexible.

  • A minimum FICO score requirement of 500
  • Minimum down payment requirement of 10% with a FICO score below 580
  • Minimum down payment requirement of 3.5% with a FICO score above 580
  • Mortgage Insurance Premium (MIP) is required for every FHA loan
  • Maximum debt-to-income ratio of over 50%
  • The home must be the primary residence
  • The borrower must have a 2-year work history with a steady income

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If your credit score is between 500 and 579, you may be able to secure an FHA loan, assuming you can afford a down payment of 10%.

Meanwhile, if your credit score is 580 or higher, you can get an FHA loan with a down payment of as little as 3.5%.

How to Get the Bad Credit Down Payment for FHA Loans

As we said earlier, you need to make a down payment of 10% of the exact amount you intend to borrow when your ARDOR score is below 580. This down payment can be sourced from your personal finance or grants from friends or families. This payment usually covers the cost of the FHA loan.

Can a large down payment offset bad credit for a home mortgage?

This is merely a wish that certainly can’t happen. No matter the amount of down payment you make, it can only reduce the amount repayable for the current loan, but unfortunately, it has no effect on your bad credit score. It does not increase it.

The lender will still carry out a check on your credit history. The best way to increase your credit score is to pay the debt off on time.

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Can a bad credit score buy a nice house with a good income?

A nice house costs more. So you need more funds to afford it. This means that you will apply for a higher amount, which increases your interest rate and down payment. You should seek a home you can afford to pay for when taking out a loan.

Can I get a home mortgage without a job?

Although, this is not one of the ways How to Buy a House With Bad Credit but Good Income, however, you can leverage someone who has a job or a higher net worth, like a co-signer. The job of a co-signer is to stand in as security for your loan. Thus, their creditworthiness is checked, not yours. In this scenario, you become a beneficiary.

How does my bad credit score affect my home mortgage?

There are several ways your bad credit score affects you. Obviously, as we have seen above, a bad credit score limits your chances of getting quick loan pre-approvals. A mortgage lender like rocket Mortgage requires a minimum credit score of 580 for their home loan. Other lenders’ rates differ too.

More so, a lower or bad credit score will certainly bring you the disadvantage of a higher monthly mortgage payment. This, in most cases, does not encourage you to take out the loan anymore.

How can you improve your credit score?

Regardless of the fact that you have seen how to buy a house with bad credit but a good income, it is not in your interest to have a bad credit score. This is because there are other personal loans that you might want to take, but you won’t get them. These are some of the many ways, or good practices, to increase your credit score over time.

Avoid multiple Loans: the higher the number of loans, the higher the amount owed. So if you reduce it, you increase your credit score

Quick Loan Repayment: Imbibe the habit of making your loan payment on time. It increases the credit score.

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Avoid Hard Credit Inquiries: When you apply for a loan, your credit report is usually gotten from credit bureaus, and it is tagged as a hard inquiry. Each hard inquiry reduces your credit score. Although Rocket Mortgage does not do hard inquiries,.

Dispute any conflicting information: If you find any disputing information on your credit score, report it to the credit bureau, and it will be settled.


Now you have seen how to buy a house with bad credit but a good income. This can be more expensive due to the high down payment. Although it depends on your credit score,. Follow our recommendations and improve your credit score to be easily pre-approved for loans in the future.

Meanwhile, don’t forget to share this piece of information on social media to help educate others on home buying with bad credit scores but a good income.

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