Can I get an affordable mortgage with a low credit score and disability income?

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Dear Credible Money Coach,

My husband and I are looking to buy a house that we can afford. We both receive SSI disability and our credit scores are low – mine’s in the 500s. Do both of our credit scores have to be 620 to get a loan? Plus I don't know who to talk to about getting a loan. - Debbie

Thanks for your great question, Debbie! Getting your credit in good shape and knowing how much home you can afford are the first steps for you and your husband to become homeowners.

Low credit scores don't exclude you from getting a mortgage if you qualify for a loan backed by the federal government. Ask potential lenders if you're eligible for any of the following mortgage programs.

FHA loans

Many people with low credit scores or incomes can benefit from getting an FHA loan. It stands for the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. The FHA insures these loans, meaning they will pay it if a borrower defaults. The insurance makes it worthwhile for private lenders to give mortgages to those who may not qualify for a conventional mortgage.

Depending on how much you can put down on a home, you may be able to qualify for an FHA loan, even with a low credit score. FHA borrowers with scores of 580 or higher can put down as little as 3.5%. If your score is 500 to 579, you must pay at least 10% down.

An FHA loan comes with lower closing costs than a conventional loan. Be aware, though, that the amount you can borrow is limited based on where you live. You can find the limits for your area on HUD's FHA Mortgage Limits page. And you can find an FHA lender through HUD's Lender List Search page.

If you or your spouse are veterans or active-duty military, or you want a home in a rural area, you may qualify for the following mortgage programs, even with low credit scores.

USDA loans

The U.S. Department of Agriculture funds Direct Loans to help very low-income Americans buy homes in some rural regions. And the USDA guarantees loans offered by other lenders to moderate-income buyers.

USDA mortgages don't require you to pay any down payment, and there's no required minimum credit score. Check if you're eligible for a USDA loan at the USDA website.

VA loans

Finally, if you or your spouse are veterans or active-duty military, you may be eligible for a VA loan. Private lenders make the loans, and the U.S. Department of Veterans Affairs guarantees a portion. VA loans, like USDA loans, don't require you to pay any money down. You can learn more at the VA website.

All that said …

It may seem unfair that having a low credit score limits your ability to get a home loan. But it can be a sign to lenders that you're struggling financially and wouldn't be able to repay them. If your credit scores are low because you're recovering from financial hardship, now might not be the best time to buy a home. Instead, focus on getting your finances in good shape and building your credit.

Even the best mortgage rate and repayment terms represent a significant financial commitment. To understand how a mortgage would affect your budget and financial future, use a mortgage payment calculator to help crunch the numbers.

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About the author:

Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.