Can You Get a Mortgage With a 580 Credit Score?

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Can You Get a Mortgage With a 580 Credit Score?

Only a small number of American families have the full amount to buy a home. The rest are forced to borrow from friends, look for housing in a cheaper area, or take out a mortgage. And this is the best option for many people who have a high credit score, a steady income, and a down payment. But what if your credit score is 580?

Although a score of 580 is on the lower end of the credit scale, it is not a deciding factor. There are loan programs designed specifically for people with bad credit. The main thing is to meet other criteria.

What a 580 Credit Score Means for Lenders

A credit score of 580 is considered bad. To lenders, it’s an indication that you’ve been a bad borrower, meaning you’ve had or continue to have late payments, a high credit card balance, or even a bankruptcy record. While it doesn’t automatically mean you’ll be rejected, it’s a red flag for most financial institutions. Mortgage lenders rely heavily on your credit score to assess your likelihood of repaying your loan on time.

This score affects how lenders view your loan application. A lower score indicates a higher risk, and each lender reviews these applications on a case-by-case basis. Some will reject you outright, others may require a co-signer or collateral, and others will approve you but offer the highest interest rates and strict terms. But when reviewing your application, they also consider your income, debt, and assets to determine whether you can manage credit responsibly.

In practice, a credit score of 580 will likely limit your ability to get a mortgage. Fortunately, there are programs that the federal government supports. They were created for people with low credit scores who dream of owning their own home.

Minimum Credit Score Requirements by Loan Type

Each lender has its requirements for credit rating when applying for a mortgage. Here is a list of loans that accept bad credit:

FHA Loans

FHA loans are one of the few mortgage products designed for borrowers with credit scores between 500 and 600. These loans are backed by the Federal Housing Administration (FHA), which allows lenders to take on more risk because the government insures part of the loan.

You may qualify for an FHA loan if you meet the following conditions:

  • A minimum down payment of 3.5% of the purchase price;
  • A maximum debt-to-income ratio of 43%, although some lenders may allow more with offsetting factors;
  • A stable income and employment history.

Keep in mind that FHA loans require mortgage insurance. This includes a down payment at closing and monthly payments over the life of the loan.

VA Loans

VA loans are another option if you qualify through military service. The U.S. Department of Veterans Affairs does not require a down payment or monthly mortgage insurance. While the Department of Veterans Affairs does not set a minimum credit score, most lenders offering VA loans typically look for a credit score of at least 580–620.

Eligibility for VA home loan programs is as follows: You must be a veteran, active duty service member, or spouse. If so, you may be eligible for a VA loan even if your credit score is 580. However, you will need to show a stable income and a manageable debt load.

USDA Loans

USDA loans are available to low- and moderate-income buyers in certain rural areas. The USDA backs these loans and offers 100% financing with no down payment. However, most lenders require a credit score of 640 or higher to qualify for automated underwriting.

If your score is 580, manual underwriting will occur, which is rare and harder to obtain. You will need to prove a high income, low debt, and a clean credit history for the past year. For most borrowers with a credit score of 580, USDA loans are often out of reach unless the lender is highly flexible and willing to make exceptions.

Conventional Loans

The government does not back conventional loans and usually follows standards set by Fannie Mae or Freddie Mac. These loans typically require a minimum credit score of 620. Lenders are much stricter when it comes to underwriting conventional mortgages, and with a 580 score, it’s almost impossible to qualify without extraordinary compensating factors.

Even if approved, you would still need a substantial down payment, a strong income, and additional cash reserves. Due to these stringent requirements, conventional loans are generally not an option for borrowers with a credit score of 580 or lower.

Other Factors That Influence Mortgage Approval

Credit score is important, but it is not everything. The bank looks at your entire financial situation. Sometimes other strengths of the application help even with a low score.

Income and Employment

Lenders want to make sure you can afford your monthly mortgage payments. They usually ask for:

  • Your last 30 days of pay stubs
  • Two years of W-2 forms or tax returns if you’re self-employed
  • Verification of employment from your employer

A steady income history gives lenders confidence, especially if your credit is not ideal. If you recently changed jobs but stayed in the same industry, that may be acceptable. Gaps in employment or inconsistent earnings may raise concerns, but a strong income can help mitigate those concerns.

Debt-to-Income Ratio

Your debt-to-income ratio, or DTI, compares your total monthly debt payments to your gross monthly income. This number helps lenders understand how much of your income is already committed to existing obligations.

Lenders generally want your DTI to be:

  • Under 36% for conventional loans
  • Up to 43% for FHA loans
  • As low as possible for USDA and VA loans

A low DTI ratio shows that you are eligible for a mortgage. If your DTI ratio is too high, lenders may think you will have a hard time making payments, especially if you have unexpected expenses.

Down Payment

The more money you can put down, the less risk the lender takes. A higher down payment also reduces the loan amount, which can improve your chances of approval.

Here’s how it works:

  • FHA loans require 3.5% down with a 580 credit score
  • VA loans require no down payment
  • Conventional loans often require 10% or more with poor credit

Putting down more money can also help you get a better interest rate. It shows that you’re financially committed and reduces the lender’s exposure if the home’s value drops.

Savings and Reserves

Cash reserves refer to the money left over after paying your down payment and closing costs. These savings reassure lenders that you can cover your mortgage if your income drops or you face an emergency.

Lenders may want to see:

  • Two to three months of mortgage payments in your bank account
  • Retirement savings or investment accounts you can access
  • Proof that the money is yours and not borrowed

How a 580 Score Affects Interest Rates and Loan Terms

Your credit score plays a major role in determining your mortgage interest rate. The lower the score, the higher the rate lenders will offer, since they’re taking on more risk.

Here’s what that means in practice:

  • A borrower with excellent credit might get a 6.25% interest rate
  • A borrower with a 580 score might receive an 8.25% rate or higher

This difference in rates can cost you hundreds of dollars per month. Over a 30-year loan, the total cost can add up to tens of thousands more in interest. With a higher interest rate, your monthly payment is also higher, which may limit how much home you can afford.

In addition to higher interest rates, a 580 score may result in:

  • Stricter loan conditions
  • Higher closing costs
  • A requirement for ongoing mortgage insurance

These terms are part of the trade-off when applying for a mortgage with fair credit. The best approach is to compare offers from multiple lenders, read the terms carefully, and understand how the rate affects your long-term costs.

Steps to Qualify for a Mortgage With a 580 Credit Score

Here are the steps to follow when applying for a mortgage with a 580 credit score:

  1. Apply for an FHA loan. This is your best option with this credit score. Find lenders that accept FHA loans with a 580 credit score and are approved for FHA loans.
  2. Gather complete documentation. Have payslips, bank statements, tax returns, and proof of a down payment. You must show that you have a stable income and are a financially responsible borrower.
  3. Reduce your debt. If possible, pay off credit cards or other loans before applying. This lowers your debt-to-income ratio and can significantly improve your chances of approval.
  4. Save up for a higher down payment. Although the minimum loan amount is 3.5%, putting down a larger down payment can help you qualify and lower your monthly payment.
  5. Avoid applying for a new loan. Opening new credit cards or getting a car loan before applying for a mortgage can hurt your score and increase your DTI.

Documents You Need for the Application

Prepare the necessary documentation in advance:

  • A government-issued photo ID (driver’s license or passport)
  • Social Security number
  • Pay stubs from the last 30 days
  • W-2 forms or tax returns from the last two years
  • Bank statements from the last two months
  • A list of your monthly debts and living expenses
  • Proof of down payment funds (savings, gifts, etc.)
  • Explanation letters for credit issues, if needed

Pros and Cons of Getting a Mortgage With a 580 Credit Score

While a 580 credit score can be challenging, many people can still buy a home. It’s all about understanding the tradeoffs. Here are the pros and cons of getting a mortgage with bad credit:

Pros:

  • You may qualify for government loans like FHA or VA.
  • You’ll be able to stop renting and start building equity.
  • You don’t need perfect credit.
  • This will give you a head start on the housing market before prices rise even more.
  • You’ll be able to refinance later if your credit score improves.

Cons:

  • Interest rates will likely be higher. You’ll end up with a pretty big overpayment.
  • You may need mortgage insurance, which will increase your monthly costs.
  • Lenders may require more paperwork and have stricter documentation requirements.
  • You will have fewer credit options compared to those with a higher score.
  • A smaller down payment may mean higher long-term costs.

Alternatives If You Don’t Qualify Immediately

If your loan application gets denied, you’re not out of options. A rejection isn’t the end — it’s a sign that something needs to change in your financial profile. Instead of applying again right away, use this time strategically.

  1. Start by reviewing your credit reports from all three major bureaus (Experian, Equifax, TransUnion). You can request them for free at AnnualCreditReport.com. Look for errors — duplicate accounts, outdated balances, incorrect payment history — and dispute them. Even one corrected mistake can improve your score.
  2. Pay down high-interest debt. Lenders care about your debt-to-income ratio. Lowering your balances not only boosts your credit but also shows you can manage money responsibly.
  3. If your income or credit score is the issue, consider applying with a co-borrower who has stronger credentials. Their financial stability can offset your weaker points and increase your chances.
  4. Meet with a HUD-approved housing counselor. They can review your entire financial situation, help you develop a practical plan, and connect you with programs you may not know exist.
  5. If buying now isn’t realistic, consider rent-to-own options. They give you time to build credit and save for a larger down payment while still securing housing.

Each step — from fixing credit report errors to reducing debt — improves your position. Within 6 to 12 months, you can come back with a much stronger application.

How to Improve Your Credit Score Before Applying

Raising your score from 580 to even 620 can make a big difference. You may be able to secure better loan terms, lower rates, and more options.

Start with these steps:

  • Pay all bills on time. Your payment history is the most important component of your credit score.
  • Keep credit card balances low. Aim to use less than 30% of your available credit.
  • Don’t open new accounts unless necessary. Too many inquiries can drop your score.
  • Check your credit reports for errors. Visit AnnualCreditReport.com to get free reports.
  • Avoid closing old accounts. The age of your credit history is a factor in building your credit score.

Even small improvements to your credit can give you more power when you apply for a loan.

Final Thoughts

Getting a mortgage with a 580 credit score is possible, especially with FHA and VA programs. But you should be prepared for the terms to be more stringent for you.

If your home may be a little weak, start by taking steps to improve your credit, reduce debt, and build savings. Focus on preparing your finances, researching your lending options, and choosing a lender wisely. That way, you’ll be in a better position when you’re ready to apply. Buying a home doesn’t require perfect credit—it requires planning, persistence, and smart decisions.