In attempting to get a mortgage with bad credit the 1st step is to determine what credit score you'll need. As of July 2023, US Bank suggests that a minimum of a 620 credit score is required to qualify for a home loan. If you do not have a 620 or above, the next step should be to see if you can raise that score. Even if you have a 620 score or higher now, you should attempt to raise that score as high as you can to lower fees and the interest rate on your loan.

Steps you can take to get a mortgage with bad credit


The amount of income is not necessarily “the” key factor. Mortgage lenders are willing to grant a mortgage loan with less than perfect credit as long as the borrower can demonstrate their ability to make payments for the 25 or 30 years of the mortgage term.

Debt Ratio

Typically a borrower has to have enough income and low enough existing obligations so that the amount of those obligations plus the mortgage payment represents less than 40% of their income. For example, with a monthly income of $5,000, if the mortgage loan payments raise total monthly debt payments to less than $2,000, then the application may be approved.

There are two ways to increase a credit score. One is to build positive credit by getting credit lines (credit cards, etc.) that will turn into positive tradelines on the credit report. The only issue with this just before applying for a home loan is that it may appear that the borrower is trying to access too much credit, and eventually have too large of a credit limit. The other way is thorough credit restoration or what most people call credit repair. Credit repair is the removal of derogatory or negative items from a credit report. See below.

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However, by doing both, building positive credit, and removing negative items, you will get the biggest boost to your credit score.

Credit Restoration

The other way to increase a credit score rather rapidly is through credit restoration or what some people refer to as credit repair. This is the process of getting older derogatory items removed from a credit report because the creditor does not validate or verify the accuracy of the account. This can be done by the consumer but it is advisable to use a reputable credit restoration company. Just as someone could represent themselves in court it may not be the best use of someone’s time. Nor do they perhaps have the expertise necessary for success especially if you are trying to get a mortgage with bad credit.

Down Payment

There is no underestimating the advantages of providing a large down payment. Usually, about 3 to 5% is the minimum required. But when it comes to applying for a mortgage loan with challenged credit, it may require a substantial amount. For example, a 10% down payment on a property worth $250,000 requires $25,000. The financial discipline required to get $25,000 together is significant. This kind of discipline is exactly what lenders want to see before approving a mortgage loan.

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This article which was originally posted in 2015 is updated regularly and was last updated in July 2023.

ERA Credit Services is an Independent Advisor
and does not directly provide credit repair services or accept funds from clients for credit repair services.