You can get a mortgage with a 560 credit score, but almost certainly only through an FHA-insured loan, and the terms are strict: at least 10 percent down, a hard 43 percent debt-to-income ceiling, mortgage insurance for 11 years, and a higher interest rate than borrowers with stronger credit will see. Eligible veterans have a second path through the VA, though most VA lenders set their own minimums well above 560. Knowing the real numbers before you apply is what separates a workable plan from a wasted application.
FHA Is the Main Route at 560
The Federal Housing Administration insures mortgages for borrowers with credit scores as low as 500. FHA doesn’t lend money directly; it guarantees the loan so the lender recovers its losses from the government insurance fund if you default. That guarantee is what convinces lenders to consider borrowers they’d otherwise turn away.
A 560 score puts you in FHA’s higher-risk tier. Borrowers with scores between 500 and 579 must put down at least 10 percent of the purchase price, compared to 3.5 percent for those at 580 or above.1HUD. FHA Single Family Housing Policy Handbook Your loan-to-value ratio is capped at 90 percent. FHA also sets county-level loan limits: for 2026, the floor in most areas is $541,287 for a single-family home, rising to $1,249,125 in high-cost markets.
Finding a Lender That Will Actually Take a 560
FHA allows scores as low as 500, but individual lenders set their own internal minimums, called overlays. Many FHA-approved lenders won’t look at applications below 620 or even 640.2myFICO. What Are Mortgage Overlays? These overlays don’t violate FHA rules. Lenders are making a business decision about how much default risk they’ll absorb.
Your real job at 560 isn’t just qualifying under FHA guidelines. It’s finding a lender that underwrites to those guidelines rather than imposing a higher floor. Smaller mortgage companies, credit unions, and lenders that specialize in FHA lending are more likely to work with scores in the 500–579 range than large national banks. Plan to contact several before you find one that will take your application.
What 10 Percent Down Looks Like
On a $300,000 home, 10 percent means $30,000 in cash at closing. That’s $19,500 more than the $10,500 a borrower at 580 would need. The gap alone is worth pausing over before you commit.
The down payment can come from savings, gifts from family, or down payment assistance programs. FHA allows gift funds to cover the entire down payment, but the donor must provide a gift letter confirming the money doesn’t need to be repaid. Whatever the source, you’ll need a paper trail: either the money has been in your account for at least two months, or you can document the transfer and where it came from.
Mortgage Insurance Will Cost You for 11 Years
Every FHA borrower pays two forms of mortgage insurance: an upfront premium and an annual premium collected monthly.
The upfront mortgage insurance premium is 1.75 percent of the base loan amount.3HUD. Appendix 1.0 – Mortgage Insurance Premiums On a $270,000 loan (90 percent of a $300,000 home), that’s $4,725. Most borrowers roll it into the loan balance rather than paying at closing, which means paying interest on it for years.
The annual MIP for a borrower putting 10 percent down on a standard 30-year loan is 0.80 percent of the outstanding loan balance, collected monthly.3HUD. Appendix 1.0 – Mortgage Insurance Premiums On that same $270,000 loan, the first year’s MIP adds roughly $2,160, or about $180 per month on top of principal, interest, taxes, and homeowner’s insurance. One benefit of putting down 10 percent or more: annual MIP drops off after 11 years. Borrowers who put down less than 10 percent (only possible at 580 or above) carry MIP for the full 30 years.
Interest Rates Will Be Higher
Lenders charge higher rates to borrowers with lower scores to compensate for default risk. Rate data for scores below 620 is hard to pin down because most published surveys don’t track that range; those borrowers are almost exclusively in FHA territory. As a reference, conventional 30-year rates in early 2026 ran from about 6.20 percent for scores of 780 and above to 7.17 percent for scores around 620. FHA rates at 560 will sit above that range, and the exact number depends heavily on which lender you find.
Even one percentage point on a 30-year mortgage adds tens of thousands in interest over the life of the loan. On a $270,000 mortgage, the difference between 6.5 percent and 7.5 percent adds roughly $65,000 in total interest. That’s the hidden cost of borrowing at 560 most people don’t calculate before they commit.
The 43 Percent DTI Cap Is a Hard Ceiling
Borrowers with scores below 580 face debt-to-income caps that cannot be loosened with compensating factors. FHA limits you to a front-end ratio of 31 percent (housing costs as a share of gross income) and a back-end ratio of 43 percent (all monthly debts, including the new mortgage, divided by gross income).4HUD. FHA Mortgagee Letter 2014-02 – Manual Underwriting Borrowers at 580 and above can exceed those limits with factors like significant cash reserves or minimal payment increases from their current rent. At 560, there’s no such flexibility.
If you earn $5,000 per month before taxes, your total monthly debt payments including the new mortgage can’t exceed $2,150. Factor in a car payment, student loans, and minimum credit card payments, and the mortgage you can qualify for shrinks quickly.
Your application will also go through manual underwriting, where a human reviewer examines your full financial picture rather than relying on an automated pass/fail. Manual underwriting takes longer, often two to four weeks, and the underwriter has discretion to weigh factors an automated system would miss. That discretion works both ways: the underwriter can also flag concerns a computer would overlook.
Federal Debts and Waiting Periods Can Stop You Before You Start
Before any lender approves an FHA or VA loan, they check your name against the Credit Alert Verification Reporting System (CAIVRS), a federal database of individuals who have defaulted on government-backed loans or owe delinquent debts to federal agencies.5Fiscal.Treasury.Gov. Do Not Pay Portal Quick Reference Card – CAIVRS A CAIVRS hit — a prior FHA foreclosure, a defaulted federal student loan, an unpaid SBA loan, or a debt to another federal agency — stops your application. No overlay or compensating factor overrides it. You resolve the underlying debt or wait out the required period.
Borrowers at 560 often have a bankruptcy or foreclosure in recent history, and FHA imposes waiting periods for both. After a Chapter 7 discharge, you must wait at least two years and show you’ve re-established good credit or chosen not to take on new debt during that time.6HUD. How Does a Bankruptcy Affect a Borrower’s Eligibility for an FHA Mortgage If the bankruptcy was caused by circumstances beyond your control, the waiting period can shrink to 12 months with documentation. After a foreclosure, the standard FHA waiting period is three years from the date the foreclosure completed.
VA Loans for Eligible Veterans
The Department of Veterans Affairs doesn’t set a federal minimum credit score, which theoretically opens the door for veterans and active-duty service members at 560. In practice, most VA-approved lenders impose their own floor of 620 to 670, though some will go lower in exchange for a higher rate or a larger down payment.7Experian. VA Loan Requirements for 2026 – Section: Credit Score VA loans have one big advantage over FHA: no monthly mortgage insurance. Instead, you pay a one-time funding fee, which for first-time use with no down payment runs around 2.15 percent of the loan amount for active-duty borrowers.8Department of Veterans Affairs. Funding Fee Schedule for VA Guaranteed Loans Veterans with a service-connected disability are exempt from the fee.
The VA also weighs residual income — the cash left over each month after your mortgage, taxes, insurance, and other major obligations. Lenders are encouraged to weigh residual income more heavily than DTI, and strong residual income can make the difference between approval and denial at 560.
USDA guaranteed loans for rural properties don’t have a federal minimum credit score either, but most approved lenders require at least 640.9Rural Development. Single Family Housing Guaranteed Loan Program At 560, finding a USDA lender willing to work with you is unlikely.
Documents to Gather Before You Apply
Manual underwriting demands more paperwork than a standard application. Incomplete files are the most common reason applications stall, so pull everything together before you start.
- Income verification: W-2s from the last two years, your most recent 30 days of pay stubs, and federal tax returns. Your lender will also request tax transcripts from the IRS using Form 4506-C to verify your reported income against IRS records.10Fannie Mae. Documents You Need to Apply for a Mortgage11Internal Revenue Service. Form 4506-C IVES Request for Transcript of Tax Return
- Asset documentation: two months of bank statements for every checking, savings, and retirement account. Large deposits outside your regular paycheck need written explanations and a paper trail.
- Alternative credit history: if your traditional credit file is thin, you can show reliability with 12 months of on-time payments for rent, utilities, insurance premiums, or similar recurring bills. Bring cancelled checks, bank statements showing the payments, or receipts.
- Letters of explanation: the underwriter will want written explanations for late payments, collections, charge-offs, or employment gaps. Stick to facts — what happened, when, and what’s different now — and attach supporting documents like a layoff notice, medical records, or a current employment agreement.
All of this feeds into the Uniform Residential Loan Application (Form 1003), the standardized form every mortgage lender uses. Discrepancies between what you report on Form 1003 and what the underwriter finds in your transcripts or bank statements will trigger questions and delays.
Should You Wait and Reach 580 First?
The gap between 560 and 580 looks small, but crossing it drops your required down payment from 10 percent to 3.5 percent, opens up more lenient DTI treatment with compensating factors, and expands the number of lenders willing to work with you.
Score improvements don’t happen overnight, but targeted actions can move the number within a few months. Paying credit card balances down to below 30 percent utilization is one of the fastest levers, and the change typically shows up within one billing cycle. Disputing inaccurate negative items can produce meaningful bumps if the errors are removed. Becoming an authorized user on a family member’s well-managed credit card can add positive history relatively quickly.
Run the numbers both ways. On a $300,000 home, the difference between 10 percent down and 3.5 percent down is $19,500 in cash. Even if it takes six months to reach 580, keeping that money in your pocket, or using part of it to pay down debt, may leave you stronger than rushing to buy now. If prices in your market are rising fast or your rent is eating into savings, waiting has its own costs. There’s no universally right answer, but most borrowers at 560 benefit from at least checking whether a few months of credit work could save them thousands upfront and over the life of the loan.