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Getting a Mortgage with Bad Credit: Options for Military Home Buyers

by Becca Stewart - April 24th, 2022

Getting a Mortgage with Bad Credit: Options for Military Home Buyers

Is it possible for military home buyers to get approved for a mortgage, even with bad credit? Yes, it’s possible, but it’s not necessarily easy. Read on for more tips about finding a lender, your loan options, and why improving your credit score matters. 

What’s considered “bad credit”?

Your credit score reflects your trustworthiness as a borrower. Credit scores range from 300 to 850, with 850 being the best. Your credit score goes down when:

  • You miss payments, or your payments are late

  • Your “debt-to-income ratio” becomes too high. That is, you owe more money than you can safely pay back based on your earnings.

  • You enter collections for outstanding debts or have your wages garnished.

  • You have minimal credit history. (Lenders often prefer “no-credit borrowers” to those with bad credit). 

A credit score of 579 or below is considered “bad credit,” with 580-669 considered “fair credit.” Those with bad credit (scores of 579 or lower) are at the greatest risk of future delinquency. Lenders are much less likely to approve a loan for those with bad credit.

Qualifying for a mortgage with bad credit

Can you buy a home with bad credit? The simple answer is “yes,” but finding a lender to approve you for a loan can be difficult.

First, shop around for lenders. Some lenders won’t consider taking a risk on low-credit-score applicants, but others are more willing to work with you. As a military home buyer, your best bet is to find a military-friendly lender who knows your options and can help you navigate the process. Start by connecting with our trusted military lender partners here

Next, read up on your options. Several loan options are available to military home buyers, each with different credit requirements (more on those below). An experienced lender can tell you more about each lending program and help you determine which is best for you. 

Finally, start saving cash. You’re much more likely to secure a mortgage with bad credit if you have a significant down payment. A 10-20% down payment proves to the lender that you are taking your financial obligations seriously and are therefore less of a risk.

Most lenders use your credit score as a jumping-off point, but they also consider other factors. For instance, if you have a low credit score but have a sizeable down payment, or your income has recently increased substantially, a lender might see you as a viable loan candidate.

Prospective home buyers with a credit score below 500 and those with a recent bankruptcy or foreclosure are unlikely to qualify. Talk with an experienced lender who can explain your options.

Your home buying options

Military members have several home buying options, even with bad or fair credit. Home buyers approved for a mortgage with bad credit may need a larger down payment and will have a higher interest rate than borrowers with good credit.


Conventional loans are not backed by government funds. They are funded through private financial institutions, such as banks or credit unions. Conventional mortgages tend to have the strictest credit requirements of all loan programs. These loan programs usually require a significant down payment (otherwise, buyers will need private mortgage insurance). 


The Federal Housing Administration (FHA) offers government-backed loans to a variety of prospective home buyers. The FHA program is an excellent option for first-time home buyers, seniors, and low-income buyers. It’s also a potential option for borrowers with bad or fair credit. 

If you have a credit score of 500 or more, you might qualify for an FHA loan. However, those with a 500-579 credit score will need a 10% down payment to qualify. Those with a 580 or better can purchase a home with an FHA loan with as little as 3.5% down. 


The U.S Department of Veterans Affairs makes home ownership easy for military service members and veterans. This VA loan program has some of the loosest credit requirements of all mortgage programs. There are no minimum credit requirements necessary to qualify, but borrowers still need a reliable income and a low debt-to-income ratio. Lenders can still deny a VA loan to applicants with bad credit. 

Getting a VA loan with bad credit

As a military service member or family member, you are eligible for VA benefits, including a VA loan. It’s even possible to secure a VA loan with bad credit. As mentioned above, the VA doesn’t have a minimum credit requirement, but the lenders who offer VA loans often do. Therefore, you’ll need to find a VA lender willing to work with your low credit score.

VA loans are an attractive option because they require a $0 down payment and often have lower interest rates than a conventional mortgage. 

Just like all mortgage programs, a VA loan undergoes an underwriting process to determine the applicant’s financial risk. During this process, the lender will examine your credit history, income, and other financial records to assess whether you are likely to pay back your loan in full and on time. You can read more about the VA’s underwriting guidelines here

First steps: Fixing your credit

It’s not impossible to secure a mortgage with bad credit, but it’s not easy. Consider renting or living with friends or family while you pay off your debt, save for a down payment, and increase your credit score. This will make qualifying for a mortgage more likely and could save you hundreds or thousands of dollars in interest.

How can you fix your credit score quickly? Check out this blog for some credit-building tips!

In the military, credit scores matter

Having healthy credit is crucial, both in the civilian and military worlds. 

In the military, credit scores don’t only impact your home buying abilities; your credit score can affect your job. Military members with a security clearance could face serious consequences – including having the clearance revoked – if they miss payments, claim bankruptcy, or otherwise damage their credit. 

Fixing your credit will put home ownership within reach while also keeping your career safe.

Ask a lender about getting a mortgage with bad credit

We know a lot about moving here at PCSgrades, but we are not mortgage experts. If you want to know more about your bad-credit home buying options, we recommend connecting with an experienced mortgage lender. Military-friendly lenders can help you determine whether applying for a mortgage – including a VA loan – is the best option for you. Click here to discover local military lenders!

headshot of Becca Stewart

Becca Stewart

Becca Stewart is an Air Force Spouse, mother of two, freelance writer, and sufferer of Wanderlust. Originally from Colorado, she enjoys anything outdoors, especially if there’s snow involved. She is a travel fanatic, always looking for her next great adventure. As a full-time writer, Becca works closely with several nonprofit organizations and is a passionate advocate for human rights and military families. Learn more at