Buying a Home in California with Bad Credit (Under 620)

A lower credit score does not mean homeownership is off the table. Programs exist to help California buyers with less-than-perfect credit.

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Your Situation

Does This Sound Like You?

Your credit score is below 620, and you have been told you cannot qualify for a mortgage. Whether your credit was affected by a past financial hardship, medical bills, divorce, or simply limited credit history, there are still paths to homeownership in California. Understanding which programs work for lower credit scores and what compensating factors lenders consider can help you move forward.

Common Challenges

Obstacles You May Be Facing

These are the most common hurdles borrowers in your situation encounter.

Being rejected by traditional lenders who require 620+ credit scores

Higher interest rates and less favorable terms due to perceived risk

Past negative events (foreclosure, bankruptcy, short sale) creating mandatory waiting periods

Difficulty distinguishing between programs that can actually help versus predatory lending offers

Your Options

Loan Programs That May Work for You

Based on this scenario, these programs could be a strong fit.

FHA Home Loans

Min. Credit Score: 580

FHA loans accept credit scores as low as 580 with 3.5% down, and some lenders go down to 500 with 10% down. FHA is the most accessible program for lower-credit borrowers. The government insurance backing gives lenders confidence to approve borrowers that conventional programs would decline.

Learn More About FHA Home Loans

Non-QM Loans

Min. Credit Score: 620

Non-QM lenders evaluate your full financial picture beyond just credit scores. Some programs accept scores in the 500-619 range if you have compensating factors like a larger down payment (15-20%), significant cash reserves, or strong recent payment history. Bank statement programs can also help if income documentation is an additional challenge.

Learn More About Non-QM Loans

Hard Money Loans (Asset-Based)

Min. Credit Score: 600

Hard money loans are primarily based on the property's value and your equity position, not your credit score. While rates are higher and terms are shorter (typically 12-24 months), they can serve as a bridge to homeownership. You can refinance into a conventional or FHA loan once your credit improves.

Learn More About Hard Money Loans (Asset-Based)
Expert Tips

Actionable Steps You Can Take

  1. 1Check your credit report for errors before applying. Dispute inaccurate late payments, collections, or wrong balances. Correcting errors can boost your score 20-50 points in some cases.
  2. 2Ask your loan officer about rapid rescoring. Paying down specific accounts or removing errors can sometimes raise your score enough to qualify within 2-4 weeks.
  3. 3Save for a larger down payment. A 10-20% down payment can offset credit risk in many programs and may open doors that 3.5% down cannot.
  4. 4Avoid opening new credit accounts, making large purchases, or co-signing loans in the months before applying for a mortgage.
  5. 5Consider adding a co-borrower with stronger credit. A spouse, partner, or family member with good credit can improve your qualifying profile and help you access better rates.
FAQ

Frequently Asked Questions

FHA loans allow credit scores as low as 500 with 10% down, or 580 with 3.5% down. Non-QM programs vary but some accept scores in the 500-580 range with compensating factors. Hard money loans may have no minimum credit score requirement but focus on property equity. Most conventional loans require a minimum of 620.
After Chapter 7 bankruptcy, the typical waiting periods are: 2 years for FHA loans, 4 years for conventional loans, and 2 years for VA loans. After Chapter 13 bankruptcy, you may be eligible for FHA as soon as 1 year into your repayment plan with court approval. Non-QM programs may have shorter waiting periods or consider the bankruptcy differently.
Yes. Some strategies can raise your score in 30-90 days: pay credit card balances below 30% of the limit (below 10% is ideal), dispute inaccurate items, become an authorized user on a family member's old credit card with perfect history, and avoid any new credit inquiries. A qualified loan officer can run a credit simulation to identify which actions would have the biggest impact.
Interest rates are generally higher for lower credit scores. An FHA borrower with a 580 score may pay 0.5-1.5% more in interest than one with a 740+ score. Non-QM loans for lower credit scores typically carry rates 2-4% above conventional market rates. However, homeownership still builds equity and wealth over time, and you can refinance to a lower rate as your credit improves.
A co-borrower (not just a co-signer) can help because their income and credit are factored into the application. For FHA loans, a non-occupant co-borrower with strong credit can significantly improve your chances of approval. Keep in mind that the co-borrower is equally responsible for the mortgage payments and the debt appears on their credit report.
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Ready to Explore Your Options?

Every situation is unique. Let our team review your finances and find the right loan program for you.

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This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Rates, terms, and availability of programs are subject to change without notice.

Reviewed by Joann Ton, Loan Officer (NMLS# 1461031) | Last updated: June 2026