Understanding the Mortgage Landscape
When it comes to qualifying for a mortgage, lenders look at a combination of factors—primarily your credit score, income, debt-to-income ratio (DTI), and employment history. While credit scores play a major role, they are not the only factor. In fact, many lenders are willing to work with borrowers who have lower credit scores if there is evidence of stable, verifiable income and responsible financial habits.
What is Considered “Bad Credit”?
In general:
– Below 580: Poor
– 580–669: Fair
– 670 and up: Good to Excellent
If you fall below the 620 range, many traditional lenders may hesitate—but don’t worry. That doesn’t mean you’re out of options.
Why Income Matters (A Lot)
Even with bad credit, a high or stable income can be a game-changer. Lenders are primarily concerned with your ability to repay the loan. If you can demonstrate consistent income and low overall debt, you present less risk—even if your credit history has a few blemishes.
What lenders want to see:
– Steady employment (preferably two years or more)
– Pay stubs, W-2s, or tax returns for self-employed individuals
– Low debt-to-income ratio (ideally under 43%)
Mortgage Options for Bad Credit Borrowers with Strong Income
Granted, we are not lenders, these are just some things we often see when it comes to the home loan process. If you want a referral to a lender to see what you situation actually entails, we can point you in the right direction. Just fill out the form on our website or give us a call.
1. FHA Loans (Federal Housing Administration)
FHA loans are government-backed and designed for borrowers with less-than-perfect credit. With a credit score as low as 500 (with 10% down) or 580 (with 3.5% down), this is often the best route for those rebuilding credit.
2. VA Loans (For Veterans and Active Military)
If you qualify, VA loans require no down payment, have no credit score minimum, and come with flexible underwriting. Your income can easily outweigh credit issues if your other qualifications are strong.
3. Non-QM Loans (Non-Qualified Mortgages)
Non-QM loans are designed for borrowers who fall outside traditional guidelines. They’re great for self-employed individuals or those with inconsistent credit histories but strong cash flow.
4. Subprime Mortgages
These loans are specifically created for borrowers with bad credit. They typically come with higher interest rates, but your income and down payment can help offset some of the perceived risk.
How to Strengthen Your Application
Even with high income, taking additional steps to present yourself as a reliable borrower can make all the difference.
✅ Save for a Larger Down Payment
Putting more money down can reduce the lender’s risk and show your financial commitment. A down payment of 10-20% can often sway the decision in your favor, especially with subpar credit.
✅ Reduce Existing Debt
Paying down credit cards and other loans improves your debt-to-income ratio and can give your credit score a quick boost.
✅ Provide Proof of Income Stability
Have your documents ready: tax returns, bank statements, pay stubs, or P&L statements if you’re self-employed. The more stable and substantial your income appears, the better your chances.
✅ Write a Letter of Explanation
If your bad credit was caused by a one-time event (such as medical bills or job loss), a short letter to your lender can humanize your application and provide context.
Common Mistakes to Avoid
If you’re trying to buy a home with bad credit, avoid these pitfalls:
– Applying with multiple lenders in a short period – This can lead to multiple hard inquiries, which temporarily lower your credit score.
– Overestimating your budget – Even with strong income, lenders will only approve you for what they believe you can afford long term.
– Ignoring your credit report – Always check your credit report for errors before applying. Mistakes happen and could be dragging your score down unnecessarily.
How The Phenix Group Can Help
At The Phenix Group, we specialize in credit restoration—but our mission goes far beyond fixing your score. We help you build a financial foundation that supports your long-term goals, like homeownership.
Our process includes:
– A free, personalized credit analysis
– One-on-one strategy sessions with a credit specialist who is well versed in mortgage guidelines
– Ongoing education and support to improve your financial health
Real Talk: You Can Own a Home
Your credit score does not define your ability to own a home. If you’re earning a steady income, taking the right steps, and working with the right team, you can get there—even faster than you think.
Don’t wait until you’re “perfect” on paper. Get started with a strategic plan that works in your current situation and improves your financial picture over time.
Ready to Make It Happen?
If you’re ready to explore your mortgage options—even with bad credit—your first step is understanding exactly where you stand.
🎯 Fill out the form from the page below to start the process of obtaining your free credit analysis with The Phenix Group. Our team will assess your current credit profile, identify opportunities for improvement, and walk you through what’s possible—starting today.
👉 https://www.thephenixgroup.com/
Final Thoughts
Buying a home with bad credit is challenging, but it’s not impossible. With the right income, strategy, and support, you can turn the odds in your favor. Let The Phenix Group be your guide on the journey to homeownership.