Can I get a conventional loan with bad credit?
It can be possible, but a lower score can limit your choices, and 620 is not a universal agency cutoff. Fannie Mae's automated system, DU, has no fixed minimum score and looks at your whole file. Big events like a foreclosure or bankruptcy come with set waiting periods. A lender or mortgage insurer may also add its own minimum.
Educational answer from Mortgage Expert. Mortgage Expert's licensed loan originator is Shahram Sondi, Florida mortgage broker, Certified Mortgage Advisor™, NMLS 186790. Sources checked .
How it works
What "bad credit" means to an underwriter
Lenders do not use the phrase "bad credit" as a rule. They look at specific things: your credit score, recent late payments, collections, and major events such as bankruptcy or foreclosure.
For Fannie Mae loans run through DU, there is no fixed minimum score. DU weighs the score with your payment history, debts, income and savings. If a loan is underwritten by hand instead, Fannie Mae generally wants 620 for a fixed-rate loan or 640 for an adjustable-rate loan.
A lender can add stricter rules, called overlays. If you put less than 20% down, the mortgage insurer also has to accept the loan.
Waiting periods after major credit events
Fannie Mae sets a waiting period after each major event. The clock starts on the date the event was completed, discharged or dismissed. It ends on the date your new loan funds.
Foreclosure: 7 years. Chapter 7 or Chapter 11 bankruptcy: 4 years from discharge or dismissal. Chapter 13 bankruptcy: 2 years from discharge, or 4 years from dismissal. Deed-in-lieu, short sale, or a charged-off mortgage: 4 years. More than one bankruptcy in the past 7 years: 5 years.
If the event happened because of extenuating circumstances, Fannie Mae allows shorter waits. These are events beyond your control, documented by the lender. Examples of the shorter waits: 3 years after a foreclosure, 2 years after a Chapter 7 bankruptcy, a short sale or a deed-in-lieu.
Limits between 3 and 7 years after foreclosure
When extenuating circumstances shorten a foreclosure wait, Fannie Mae adds limits until the full 7 years pass. You may buy a home to live in, with a loan of no more than 90% of the value (LTV), or less if the program's normal limit is lower. A limited cash-out refinance is also allowed. Second homes, rentals and cash-out refinances must wait the full 7 years.
Fannie Mae's guide also covers re-establishing credit after the event, so the lender will look at how you have handled credit since then.
Counting a foreclosure waiting period
Illustrative example. Not a real borrower, offer or quote. It shows how Fannie Mae's waiting periods are counted, not whether a loan would be approved.
A buyer's previous home finished foreclosure on March 1, 2021. Assume the completion date is shown on the credit report. The buyer wants a Fannie Mae loan for a $400,000 home to live in. The example counts when each waiting period ends and the largest loan allowed under the 3 to 7 year limit.
| Path | Waiting period | New loan can fund on or after | LTV limit |
|---|---|---|---|
| Standard | 7 years | March 1, 2028 | Normal program limits |
| Documented extenuating circumstances | 3 years | March 1, 2024 | 90% until March 1, 2028 |
The math, step by step
- Standard wait: 2021 + 7 = 2028. The new loan can fund on or after March 1, 2028.
- Extenuating circumstances: 2021 + 3 = 2024. The new loan can fund on or after March 1, 2024, if the lender documents the circumstances.
- Until March 1, 2028, the loan is capped at 90% of the value: $400,000 × 90% = $360,000.
- That leaves a down payment of at least $400,000 − $360,000 = $40,000 during that window.
Takeaway: The date the foreclosure was completed sets the clock, and the shorter path needs proof of circumstances beyond the buyer's control. Between years 3 and 7, plan for at least 10% down.
Easy things to get wrong
- The clock starts when the event was completed or discharged, not when you first fell behind. Check the date on your credit report and your court or closing papers.
- Divorce or a job move is not automatically an extenuating circumstance. The lender has to document that the event was beyond your control.
- Recent late payments can weigh on DU even if your score looks fine, because DU looks at your payment history, not only the score.
- FHA has its own waiting periods. After a foreclosure, FHA's general wait is 3 years, so compare both programs on your actual dates.
What to do next
Find the completion, discharge or dismissal date for any major credit event and count forward. Then read how waiting periods compare across loan types.
Have a past credit event and not sure which waiting period applies? Shahram Sondi can review your dates and documents and compare conventional and FHA timing for your file.
Check the sources
- Fannie Mae Selling Guide B3-5.3-07: waiting periods after significant derogatory credit
- Fannie Mae Selling Guide B3-5.3-09: DU credit report analysis
- Fannie Mae Selling Guide B3-5.1-01: credit score requirements
- HUD Handbook 4000.1 (foreclosure waiting period, manual underwriting)
Sources checked . Program guidance and lender requirements can change.
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Educational only. Conventional loan guidelines, lender overlays, rates, fees, PMI, LLPAs, and underwriting requirements can change. Final eligibility depends on full underwriting review. Mortgage Expert, Inc. is not affiliated with Fannie Mae, Freddie Mac, FHFA, or any government agency.
