You can get a home loan with a 580 credit score, and the main route is an FHA-insured mortgage with 3.5 percent down. Eligible veterans and service members may also qualify for a VA loan at this score through many lenders. Conventional mortgages are generally out of reach until your score reaches 620. The approval is real, but the price tag is higher than it would be at better credit, so the decisions worth making are about cost and timing, not just eligibility.
FHA Loans Are the Main Path at 580
The Federal Housing Administration, part of HUD, sets 580 as the minimum credit score for its 3.5 percent down payment tier. Hit that score, and on a $300,000 home your minimum down payment is $10,500 rather than the much larger amounts other programs want.
That 580 figure is a federal guideline. Individual lenders can and do set their own minimums higher, a practice known as a lender overlay. A bank might require 600 or 620 even on an FHA loan because it wants extra cushion against default. If one lender turns you down, another FHA-approved lender with different internal standards may approve you. At 580, shopping multiple lenders is not optional.
If Your Score Is Below 580
FHA doesn’t cut you off entirely at 579. Borrowers with scores between 500 and 579 can still qualify, but the down payment jumps to 10 percent. On that same $300,000 home, you’d need $30,000 upfront instead of $10,500. Below 500, FHA won’t insure the loan at all.
In practice, finding a lender willing to originate below 580 is harder than the guidelines suggest. Many simply won’t go there regardless of how much you put down. If you’re in the 500 to 579 range, expect to contact several lenders and possibly work with specialists who focus on lower-credit borrowers.
VA Loans If You’re Eligible
The Department of Veterans Affairs doesn’t set a minimum credit score for its home loan guarantee. In theory, a veteran with a 500 score could qualify. In practice, private lenders that originate VA loans impose their own minimums, typically in the 580 to 620 range.
VA loans carry a significant advantage over FHA: no down payment and no monthly mortgage insurance. If you’re a veteran, active-duty service member, or eligible surviving spouse, pursue a VA loan aggressively before settling for FHA. Thresholds differ by lender, so ask directly. A lender that requires 620 for VA might still approve you for FHA at 580, giving you a backup within the same institution.
Why Conventional Loans Are Off the Table
Conventional mortgages sold to Fannie Mae or Freddie Mac generally require a minimum credit score of 620, and some programs push the floor to 660 or 680. At 580, conventional financing is essentially unavailable. This matters later: conventional loans let you drop private mortgage insurance once you reach 20 percent equity, while FHA mortgage insurance works differently and sticks around much longer.
What FHA Mortgage Insurance Will Cost You
FHA mortgage insurance is the trade-off for the low down payment, and it’s a substantial ongoing cost. You pay two separate premiums.
The upfront mortgage insurance premium is 1.75 percent of the loan amount, due at closing. On a $290,000 loan (what you’d owe after putting 3.5 percent down on a $300,000 home), that’s roughly $5,075. Most borrowers roll this into the loan balance instead of paying cash.
The annual mortgage insurance premium is 0.55 percent of the loan balance per year for borrowers putting less than 5 percent down on a 30-year term. That works out to about $133 per month on a $290,000 loan, declining slowly as the balance shrinks.
Here is the part that catches people off guard. If you put less than 10 percent down, which includes every borrower using the 3.5 percent minimum, annual MIP lasts for the entire life of the loan. The only way to eliminate it is to refinance into a conventional mortgage once your credit score and equity improve. Borrowers who put 10 percent or more down can have MIP removed after 11 years.
What Else Underwriters Will Check
Your credit score opens the door, but the underwriter looks at the full picture. Several factors matter as much as the number itself.
Debt-to-Income Ratio
FHA guidelines generally cap your total monthly debt payments, including the new mortgage, at 43 percent of gross monthly income. Some borrowers qualify with ratios up to 50 percent if they have strong compensating factors like significant cash reserves or a long employment history. If you earn $5,000 per month before taxes, your total monthly obligations including the mortgage, car loans, student loans, and minimum credit card payments should stay below roughly $2,150 to $2,500.
Cash Reserves
Underwriters at 580 want reassurance that one bad month won’t sink you. Three to six months of mortgage payments sitting in savings after closing costs are paid makes a meaningful difference. If your monthly payment will be $1,800, showing $5,400 to $10,800 in reserves signals that you can absorb a car repair or medical bill without missing a payment.
Past Bankruptcy or Foreclosure
A 580 score often reflects past financial trouble, and certain events trigger mandatory waiting periods before FHA will insure a new loan. After a Chapter 7 bankruptcy discharge, FHA requires a two-year wait. Chapter 13 is treated differently: you may be eligible after 12 months of on-time payments under your repayment plan, with court approval. After a foreclosure, the standard FHA waiting period is three years from the date the lender’s claim was paid.
Federal Debt and CAIVRS
HUD’s Credit Alert Verification Reporting System, known as CAIVRS, flags anyone who has defaulted on or is delinquent on a federal loan, including previous FHA mortgages, federal student loans, and SBA loans. If you appear in CAIVRS, you’re barred from a new FHA loan until the debt is resolved. Clearing a CAIVRS hit typically means paying the defaulted debt, setting up a repayment plan, or obtaining a waiver from the relevant agency.
Closing Costs and Seller Help
Beyond the down payment, closing costs typically run 2 to 6 percent of the loan amount. On a $290,000 FHA loan, that’s $5,800 to $17,400 covering the appraisal, title insurance, attorney or escrow fees, recording fees, and prepaid items like homeowners insurance and property tax escrow. The 1.75 percent upfront MIP sits on top of that if you aren’t rolling it into the loan.
FHA rules allow the seller to contribute up to 6 percent of the sale price toward your closing costs, which is worth negotiating in a buyer-friendly market. Gift funds from family members are also permitted for both the down payment and closing costs, though the lender will require a gift letter confirming the money doesn’t need to be repaid.
What a 580 Score Actually Costs You
Getting approved is one thing; paying for the loan is another. A 580 credit score typically results in an interest rate one to two percentage points higher than what a borrower with a 740 score would receive. On a $290,000 30-year mortgage, each additional percentage point adds roughly $60,000 to $65,000 in total interest over the life of the loan. Combined with FHA mortgage insurance that never drops off, a 580-score borrower pays dramatically more than someone who waited and improved their credit first.
That math doesn’t mean you should never buy at 580. If rents in your area are climbing fast or you’ve found a property that makes financial sense, locking in a home now and refinancing later once your score improves can work out. Go in with clear eyes about what the loan actually costs, and have a concrete plan for when and how you’ll refinance to shed the MIP and lower your rate.