Can I Buy House With 500 Credit Score?

Written and reviewed by Ndukwe Kalu, Managing Member, Tidal Loans · 50+ years combined investor-lending experience

A credit score of 500 is considered poor, and it can pose significant challenges when trying to secure a mortgage. However, it is not entirely impossible to buy a house with a 500 credit score. This article explores the options available, the steps to improve your chances, and the considerations to keep in mind when buying a home with a low credit score.

Challenges of Buying a House with a 500 Credit Score

Limited Loan Options

• Traditional Lenders: Most traditional lenders require a minimum credit score of 620 for conventional loans.
• Higher Interest Rates: Borrowers with lower credit scores are often offered higher interest rates, which can increase the overall cost of the loan.

Stricter Terms

• Larger Down Payments: Lenders may require a larger down payment to offset the risk associated with a lower credit score.
• Stricter Eligibility Criteria: Borrowers may need to meet more stringent criteria, such as higher income levels or additional documentation.

Loan Options for Low Credit Scores

FHA Loans

The Federal Housing Administration (FHA) offers loans designed for borrowers with lower credit scores:

• Credit Score Requirement: FHA loans require a minimum credit score of 500.
• Down Payment: Borrowers with a 500 credit score need to make a 10% down payment. For scores of 580 and above, the down payment requirement is 3.5%.

VA Loans

VA loans are available to eligible veterans and active-duty service members:

• No Minimum Credit Score: The VA does not set a minimum credit score requirement, but individual lenders may have their own criteria.
• No Down Payment: VA loans often require no down payment, making them a viable option for eligible borrowers with low credit scores.

Subprime Mortgages

Subprime mortgages are designed for borrowers with poor credit:

• Higher Interest Rates: These loans come with significantly higher interest rates due to the increased risk.
• Larger Down Payments: Typically require larger down payments compared to traditional mortgages.

Steps to Improve Your Chances

Save for a Larger Down Payment

Saving a larger down payment can improve your chances of getting approved for a mortgage and may result in better loan terms.

Improve Your Credit Score

• Pay Bills on Time: Timely payments can positively impact your credit score.
• Reduce Debt: Lowering your overall debt can improve your debt-to-income ratio and credit score.
• Check Credit Reports: Regularly review your credit reports for errors and dispute any inaccuracies.

Consider a Co-Signer

Having a co-signer with a strong credit history can enhance your mortgage application and improve your chances of approval.

Seek Professional Advice

• Credit Counseling: Working with a credit counselor can help you develop a plan to improve your credit score and financial situation.
• Mortgage Broker: A mortgage broker can help you find lenders who specialize in working with borrowers with low credit scores.

Considerations When Buying with a Low Credit Score

Budgeting for Higher Costs

• Higher Monthly Payments: Expect higher monthly mortgage payments due to increased interest rates.
• Budget for Repairs: Consider potential repair and maintenance costs, especially if you are purchasing an older or less expensive property.

Understanding Loan Terms

• Read the Fine Print: Carefully review the terms and conditions of any mortgage offer, paying close attention to interest rates, fees, and penalties.
• Long-Term Financial Planning: Ensure you have a plan in place to manage your mortgage payments and other financial obligations over the long term.

Buying an Investment Property With a 500 Credit Score

Here’s the part most “500 credit score” articles skip: if you’re buying a rental or a flip rather than a home to live in, credit matters far less. As a direct investment-property lender, we underwrite the deal — the property’s rental income on a DSCR loan, or its after-repair value on a fix-and-flip — so there is no minimum credit score on our programs. We do pull a credit report, but a 500 score doesn’t end the conversation the way it does with a conventional mortgage. It shifts your terms: a lower score typically means a lower loan-to-value, a higher rate, and more reserves — not a denial.

A worked DSCR example at a 505 credit score

Say you’re buying a $250,000 single-family rental that leases at market for $2,300 a month, and the full payment — principal, interest, taxes, insurance (PITIA) — comes to $1,900. The DSCR is $2,300 ÷ $1,900 = 1.21. That’s a fundable deal regardless of a 505 credit score, because the rent covers the note. What the low score changes is leverage: instead of stretching toward our 85% purchase max, we’d likely structure the deal closer to 70–75% LTV and ask for reserves. The property carries the loan; the score just prices the risk.

The same logic applies to a fix-and-flip: we size the loan against the after-repair value and your exit, so a rough personal credit file doesn’t block an otherwise strong deal. Investors who’ve been turned away by conventional lenders for a low score are usually surprised how differently an investment-property loan reads. We can also close fast because there are no tax transcripts or employment letters to chase.

Conclusion

While buying a house with a 500 credit score is challenging, it is not impossible. Exploring loan options like FHA and VA loans, improving your credit score, saving for a larger down payment, and seeking professional advice can enhance your chances of securing a mortgage. Understanding the challenges and being prepared can help you navigate the home-buying process successfully.

Thinking about real estate investing instead? A low credit score is far less of a barrier on an investment property. Tidal Loans qualifies you on the property — the rental income for a DSCR loan, or the after-repair value for a fix-and-flip — not your personal credit. → Explore investment loan programs

Frequently Asked Questions

Can I buy an investment property with a 500 credit score?

Yes. Because an investment-property loan is underwritten on the deal rather than your personal income, there’s no minimum credit score. We pull a credit report, but a 500 score doesn’t disqualify you — it results in more conservative terms, such as a lower loan-to-value, a higher rate, or additional reserves. We do not lend on owner-occupied or primary residences.

Can I get a DSCR loan with a 500 credit score?

Yes. A DSCR loan qualifies on the property’s rental income against its payment, not your credit, so a low score doesn’t close the door. As long as the rent supports the loan, we can fund it — the score mainly affects your rate and leverage. There’s also no minimum DSCR: we fund ratios below 1.0 and even below 0.75 when the rest of the file supports it.

Do I need good credit for a hard money loan?

No. Hard money and fix-and-flip loans are secured by the property and its after-repair value, so they’re far more forgiving of a low credit score than a conventional mortgage. We do review your credit, but the deal carries the underwriting. A weaker score typically means a lower loan-to-cost or more reserves rather than a denial.

Related reading: if you are still building your score, see how fast authorized-user status can move a credit score. If you have been quoted “no credit check” offers, read what no-credit-check hard money actually means — and note that hard money is investment-property financing, not a personal loan for bad credit.