Getting a mortgage with bad credit — FICO defines “poor” credit as having scores below 580 — will take extra effort to find the right loan program from the right lender. But yes, there are home loans for low credit scores, including government-backed mortgages (under the friendly acronyms FHA, VA and USDA) and lender-specific programs that offer lenient eligibility criteria, grants and other assistance.
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To jump-start your search, CNN Underscored Money conducted an exhaustive review of 30 widely available banks, credit unions and online companies to determine the best bad-credit mortgage lenders. Before selecting one and submitting an application, however, consider taking time to improve your credit and evaluate the best loan type for your situation.
Minimum Credit Score
580 for FHA and VA loans, 620 for conventional mortgages and 680 for jumbo loans
Days to close
Average closing time is 36 days for a conventional mortgage; 21 days for a refinance
On Rocket Mortgage’s Website
Methodology
To determine the best home loans for low credit scores, our editors and data researchers collected and analyzed more than 500 data points from 35 primary sources. We then awarded out-of-5 ratings to lenders based on how well they fared across four categories: loan cost, loan details, accessibility and repayment experience. We gave the most weight to accessibility, or how wide lenders open the door for mortgage applicants with poor credit. View our complete methodology below.
- 30 companies reviewed
- 540 data points analyzed
- 18 features considered
- 35 primary data sources used
Rocket Mortgage
Best bad credit mortgage lender
Why we picked it
Rocket Mortgage ranks as the best bad credit mortgage lender for its customized mortgage options and excellent customer service ratings. Plus, it offers an affordable housing down payment grant program for eligible homebuyers.
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Called the ONE+ program, you need just a 1% down payment and Rocket Mortgage could contribute another 2% for home loans up to $350,000 — that means you could get up to $7,000 in free money toward your homebuying costs. There are income limits based on your location and you need a minimum FICO credit score of 620, which is considered “fair.”
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While Rocket Mortgage has many strengths, it also uses the highest minimum credit score possible for an FHA loan, which is 580. Additionally, the lender uses traditional credit scoring models, whereas some competitors consider alternative credit data.
Pros
- High J.D. Power customer satisfaction scores
- 1% down payment possible with assistance grant
- Flexible repayment term options (any term between eight and 29 years)
- Up to $10,000 in closing cost credit if you work with a Rocket Homes real estate agent
Cons
- Doesn’t offer USDA loans
Who should use it
Homebuyers whose income and credit qualify for the ONE+ program
New American Funding
Best for a non-qualifying mortgage
Why we picked it
New American Funding (NAF) offers a few different ways to get a mortgage approval with bad credit. For starters, it offers non-qualifying mortgages (non-QMs), which can qualify borrowers who have high debt-to-income ratios, lower credit scores or prior bankruptcies.
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Good to know: Non-QM loans help nontraditional borrowers, such as self-employed and bad-credit consumers. While they’re a top mortgage option for poor credit, these loans typically require higher down payments and carry increased interest rates.
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NAF also has multiple repayment terms available for both fixed- and adjustable-rate mortgages — the lender’s I CAN program lets you choose any term between eight and 30 years. An adjustable-rate mortgage can help keep your payments low at the beginning of your mortgage.
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While New American Funding publishes its daily mortgage rates, those are generally reserved for higher-credit applicants. You also won’t be able to get a rate estimate without supplying your name and email address.
Pros
- Offers non-QMs
- Flexible repayment terms (8 to 30 years)
- Pathway to Homeownership program provides up to $8,000 grant for first-time homebuyers
- 14-business-day close guarantee
- 5-year rate protection pledge allows you to refinance without lender or appraisal fees if APRs decrease
- Above-average customer satisfaction scores
Cons
- Email address required to get a personalized loan quote
Who should use it
Borrowers looking for alternative loan options for either buying a home or refinancing a mortgage
Cardinal Financial
Best for a long rate lock
Why we picked it
Cardinal Financial is a national mortgage lender with several home loan options for low credit scores. In addition to FHA, conventional, jumbo and VA loans, eligible borrowers can also apply for a USDA loan. That’s a 0% down payment program that helps low and moderate-income buyers in eligible areas.
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Another standout feature is Cardinal Financial’s rate lock period, which can last up to 90 days. In a real estate market that often requires making multiple offers before one is accepted, having that cushion of extra time could help you stay on budget if rates increase.
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One drawback of choosing Cardinal Financial is that its J.D. Power origination satisfaction rating was nine points below the average of other lenders we analyzed in this study. Additionally, you won’t find any adjustable-rate mortgages.
Pros
- Rate lock up to 90 days
- User-friendly loan origination platform for uploading documents
- Offers financing for nontraditional properties, including manufactured homes, condos and construction
Cons
- Below-average customer satisfaction rating
- Doesn’t display current rates
- No adjustable-rate mortgages available
Who should use it
Eligible buyers who want to apply for a USDA loan or want a three-month rate lock
Fairway Independent Mortgage
Best for customer satisfaction
Why we picked it
Fairway Independent Mortgage has the highest J.D. Power origination customer satisfaction rating out of all the lenders we analyzed. The average score was 730, but Fairway hit a home run with a score of 776.
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On top of that, the lender offers affordable housing options that provide eligible applicants with a $7,000 grant through the Fairway Community Access program. The program is available in certain areas in Arizona, California, Florida, Georgia, Illinois, Maryland, Michigan, Missouri, New York, Ohio, Oklahoma, Pennsylvania, Tennessee and Texas, plus the District of Columbia.
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One drawback is that Fairway Independent may transfer the servicing of your mortgage loan after closing. That means you’ll make your payments to a different company, and you don’t have any choice, regardless of their customer service reputation.
Pros
- Highest customer satisfaction rating
- Affordable housing program available
- Various loan program options, including for physicians
- Five fixed repayment term options between 10 and 30 years
Cons
- Current rates not listed online
- Mortgage servicing may transfer to another company
Who should use it
Borrowers seeking the best customer experience while applying for your loan
BMO Bank
Best for low down payment mortgages
Why we picked it
BMO Bank has a number of home loan programs that come with a low or even no down payment requirement. In addition to FHA and VA loan options, the lender also offers Neighborhood Home Loans, Home Possible and housing finance agency programs.
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Borrowers meeting certain criteria could qualify for grants of up to $13,000 toward your down payment. It also offers programs for minority borrowers and those buying in either a majority minority census tract or a low- to moderate-income tract in certain states.
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One downside to choosing BMO is that you can’t get very far in the pre-qualification process without submitting your personal information. Once you do, you can expect a phone call from the lender before you get any kind of quote. The lender’s website also mentions a mortgage application fee but doesn’t list how much that costs.
Pros
- Multiple assistance programs available
- Several specialty mortgages offered
- Bank with BMO and receive a 0.125% rate discount with autopay
Cons
- Must provide personal contact information to get pre-qualified
- Application fee required
Who should use it
Fair credit borrowers who are a match for one of BMO’s low-down-payment programs
Carrington Mortgage Services
Best for borrowers with a past bankruptcy
Why we picked it
Carrington Mortgage Services offers a few loans with credit scores as low as 500, including FHA, VA and adjustable-rate mortgages.
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On top of that, the lender also has a non-QM loan called the Carrington Flexible Advantage loan. This home loan is available for both purchases and refinancing and is available to borrowers with adverse credit events like a recent bankruptcy, short sale, foreclosure or late payments. The minimum credit score requirement is 550.
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Although widely available in the US, Carrington doesn’t offer mortgages in Massachusetts. Also, the lender was fined $5.25 million by the Consumer Financial Protection Bureau in 2022 for wrongly charging fees and reporting false information to credit bureaus while pandemic protections were in place.
Pros
- Considers alternative credit data
- 500 credit score allowed for some types of home loans
Cons
- Not available in Massachusetts
- Not possible to complete the application process online
- Below-average J.D. Power servicer satisfaction rating
- Recently fined for mortgage violations during the pandemic
Who should use it
Borrowers with one or more negative events on your credit reports
CrossCountry Mortgage
Best for lowering your PMI
Why we picked it
CrossCountry Mortgage’s Bye Bye PMI program lowers the amount of private mortgage insurance you pay on conventional loans. And since the minimum credit score required for this loan type is 620, it can be a way for fair credit borrowers to save money. Instead of the usual 20% down payment required to avoid PMI, you can avoid it with a 15% down payment.
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CrossCountry also offers various home purchase mortgages and refinancing options, including streamline refinances for FHA, VA and USDA loans. CrossCountry also has above-average J.D. Power customer satisfaction scores.
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While CrossCountry features multiple mortgage promotions — including lender credits for a future refinance — to help you save, some of them are time-sensitive. With today’s tight buyer’s market, it can be difficult to ensure you get an offer accepted before the promotion expires.
Pros
- Up to $6,500 in down payment assistance grants for first-time homebuyers
- 90-day rate lock available
- High customer satisfaction scores
- Lender claims that most loans close within 21 days
- No PMI on conventional loans with 15% down payment
Cons
- Rates not advertised online
- Time-sensitive promotions may be difficult to capture during tough buyer’s market
- No quote without entering an email address
Who should use it
Borrowers who can afford a 15% down payment to lower their PMI costs
Guild Mortgage
Best for homebuyer assistance programs
Why we picked it
Guild Mortgage has all of the standard mortgage options as well as multiple niche programs to explore, including:
- 3-2-1 Home Plus helps first-time homebuyers with low or moderate incomes and minimum 620 credit scores. You only need a 3% down payment, and you’ll receive a $2,000 Home Depot gift card and up to $2,500 toward your closing.
- Complete Rate uses alternative credit data, such as bank deposits and rental payment history, to qualify applicants without credit scores.
- Zero Down represents two no-down-payment programs for homebuyers seeking a primary residence who don’t have savings to put toward their home purchase.
Guild Mortgage also has a high loan servicer satisfaction rating from J.D. Power, but its origination satisfaction rating is below average. Additionally, mortgages from Guild aren’t available in New York.
Pros
- Many homebuyer assistance programs
- Various mortgage types, including non-QM and physician loans
- High loan servicer satisfaction rating
Cons
- Doesn’t display rates online
- Low origination satisfaction rating
- Not available in New York
- Must provide email before getting any loan quote details
Who should use it
Buyers who could benefit from one of Guild’s assistance programs
Understanding how credit scores impact mortgage rates
Your credit scores impact both your eligibility for a mortgage as well as your interest rate. The lower your credit scores, the higher your mortgage rate will be, since it signals to a lender that you may be less likely to make your mortgage payments each month. By earning more from the interest you pay, the lender reduces the risk of potentially losing money if you default on the home loan.
Note that these are the average rates. Getting mortgage approval with bad credit will come with a higher interest rate than the rates listed here.
6 tips to get mortgage approval with bad credit
1. Improve your credit scores
The higher your scores, the more loan options you can choose from. On top of that, you’ll qualify for a lower interest rate. But increasing your credit scores can take time. Negative items typically remain on your credit report for seven to 10 years, but the impact on your actual scores lessens over time.
Start by:
- Making on-time payments to show you can manage your bills
- Improving your credit utilization ratio by paying down credit card balances and asking creditors to raise your credit limit
- Avoiding hard credit inquiries and opening new credit lines, since each one can cause your score to drop by a few points for a year
Related >> What factors affect your credit scores?
2. Check your credit reports
Search for potential errors on your credit reports to make sure your scores aren’t lower than they should be. There may be incorrect balances or even fraudulent activity you weren’t aware of. You can dispute credit report errors and the credit bureau must investigate and resolve the issue within 30 days.
3. Increase your down payment
A larger down payment shows that you have more financial interest in staying in your house and may be less likely to default. With a 20% down payment, you immediately start off with sizable equity and can lower your mortgage payments by avoiding PMI. Consider strategies to save for a down payment, including good old-fashioned budgeting.
4. Pay down debt
Paying down debt can help your mortgage approval in a couple of ways. For starters, you’ll lower your amounts owed, which accounts for 30% of your FICO credit scores. Additionally, your total debt impacts a lender requirement called your debt-to-income ratio (DTI).
DTI measures how much you pay in monthly debts (including your future mortgage payment) compared to your monthly pre-tax income. DTI limits vary by lender, but if you have too much debt, you may not qualify for as large a home loan as you’d like. If you apply for a mortgage with bad credit, having a low DTI (36% or lower) may help improve your odds of approval, but higher DTIs may be acceptable.
5. Add a co-applicant
Applying alongside a co-borrower could help you qualify by adding their income to the equation, but you don’t automatically get to take advantage of their good credit scores. That’s because lenders use the “lower middle” score: Since everyone has a credit score from each of the three major credit bureaus (Equifax, Experian and TransUnion), the lender will take the borrower with the lowest credit and use their middle score.
But a co-applicant could add extra income and potentially help you qualify thanks to a lower debt-to-income ratio.
6. Compare multiple lenders
It’s critical to shop around when you’re looking for a home loan with bad credit. As you can tell from our roundup of lenders, each one has unique eligibility criteria. Some consider alternative credit data and some allow for potential black marks like previous bankruptcies.
While it’s riskier for a lender to give a mortgage to someone with below-average credit, they can charge higher interest rates and potentially earn more money. That’s why it’s important to not only choose a mortgage lender who works with your credit profile but to also compare the costs.
APRs offer the most complete picture of a loan’s cost because they account for both the interest rate and fees. But also explore proprietary lender programs, including those offering down payment assistance, to get the best deal possible.
5 home loans for low credit scores
1. FHA loans
Typical credit score required: 500 to 580
An FHA loan is backed by the government and helps borrowers qualify with less-than-perfect credit. You may be eligible with a 500 credit score, but you’ll need to make a 10% down payment. But if you have a 580 credit score or higher, you only need a 3.5% down payment.
FHA loans come with mortgage insurance. The downside is that it doesn’t go away if your down payment is less than 10% – no matter how much equity you have. You would need to refinance the loan to drop the mortgage insurance. On the other hand, if your down payment is 10% or more, you can eliminate mortgage insurance after 11 years.
Here are current FHA loan rates:
2. VA loans
Typical credit score required: Varies by lender, often 620
VA loans are designed for veterans and military service members and their families, and they don’t have minimum credit score requirements. However, each lender can implement its own standards, so be sure to shop around. The good news is that there’s no down payment required and DTI limits are usually higher than other options.
However, VA loans charge an initial funding fee between 1.25% and 3.30% based on the size of your down payment and whether you’ve used this type of mortgage previously.
Here’s a look at current VA loan rates:
3. USDA loans
Typical credit score required: Varies by lender, often 620
Like VA loans, USDA loans have no official minimum for credit scores, but many lenders set the bar at 620. These mortgages also come with a 0% down payment, making it easy to buy a home without substantial savings. However, there are two eligibility limitations:
- Location: USDA loans are intended only for certain properties. Use the USDA property lookup map to search your rural or suburban area or check a specific address.
- Income: Limits are based on your area and family size. Search for your county to see the income limits based on how many people are in your household.
4. Freddie Mac Home Possible
Typical credit score required: Varies by lender
This mortgage is designed for very low and low-income borrowers. To qualify, your wage must be no more than 80% of your area’s median income. Credit score requirements are flexible; in fact, a credit score may not even be required if you have a 5% down payment and meet other criteria. Otherwise, the minimum down payment is just 3%.
5. Conventional loan
Typical credit score required: 620
A conventional loan isn’t insured by the federal government. As a result, lenders typically require you to have good credit scores and a strong income. However, some lenders only require a down payment of 3%, which is smaller than FHA loan requirements.
If you have bad credit, it can be hard to meet eligibility requirements for a conventional loan. You may need to make a larger down payment, prove significant assets or come up with another compensating factor to qualify.
How to apply for a mortgage
- Save for a down payment. A higher down payment shows financial stability and gives you a lower loan-to-value (LTV) ratio. That helps keep your monthly payments lower and may decrease the amount of time you have to pay for mortgage insurance, assuming you don’t make a 20% down payment.
- Review your credit. Check your credit scores to understand whether you’ll be eligible for certain loan programs and lenders. Also, check your credit reports (via AnnualCreditReport.com) for errors. If you spot any, begin the dispute process as soon as possible.
- Choose a loan program and repayment term. There are mortgage options for poor credit, and it’s crucial to understand how each differs — loan officers and mortgage brokers can help. Also, calculate the cost difference between different loan terms, perhaps using a monthly mortgage payment calculator. While securing the lowest APR is important, the length of the loan term also affects how much you’ll pay in interest over the long haul.
- Compare lenders. When shopping around, compare APRs and loan terms. Also, consider fees, such as loan origination fees and other closing costs. But zoom out too to determine which lenders serve your overall needs best — the best mortgage lenders for first-time homebuyers, for example, are different from the top overall mortgage companies.
- Get preapproved. After choosing a lender, seek mortgage preapproval. You must supply some basic documentation and undergo a hard credit check to get a firm estimate on your mortgage terms. This step gives you a preapproval letter that you can submit with your offer on a property. It tells home sellers that you’re a serious homebuyer.
- Submit a formal application. Once a seller accepts your offer, you can officially submit a formal mortgage application. You may need to submit extra financial documentation requested by the lender.
- Proceed through underwriting. The mortgage underwriting process involves a more thorough review of your financial situation, which involves evaluating your income, employment, debts, credit history and assets — and the value of the property you’re aiming to purchase.
- Close on the loan. Once your lender has fully underwritten your loan, it’s time to close. Once you sign all of the appropriate documents, you’ll receive keys and move into your new home.
Methodology
Eight lenders stood out from the crowd as offering among the best home loans for low credit scores. While CNN Underscored Money editors were focused on lenders’ eligibility requirements (particularly around credit), we judged banks, credit unions and online companies across four categories of loan features, including:
Loan cost (25%)
Here, we considered the dollars and cents of each lender’s products, asking questions such as:
- Does the lender prominently display interest rates?
- Are mortgage applicants able to lock in an interest rate?
- Can customers score a rate discount?
- What are the fees charged for this lender’s loan programs?
Loan details (20%)
This category is about the nuts and bolts of the bad credit mortgage. We rewarded lenders with low down payment options, proprietary assistance programs and various repayment options.
Accessibility (40%)
Now comes the crux of it all. The best home loans for low credit scores don’t just have more lax credit score requirements. They’re also available nationwide, come in all shapes and sizes (FHA and VA loan options, for example) and even consider alternative data to help you get approved.
Repayment experience (15%)
If you’re seeking mortgage approval with bad credit, you may know a thing or two about bad customer service. We attempted to weed out low-performing lenders by reviewing their website resources, branch availability and ratings, reviews and track record as told by independent organizations, including:
- Better Business Bureau
- Consumer Financial Protection Bureau
- J.D. Power
- National Mortgage Licensing System
What didn’t make the cut
Twenty-two lenders fell short of our list of the best bad-credit mortgage lenders. Here are examples of well-known lenders’ shortcomings:
- Ally Bank doesn’t offer government-backed mortgages.
- Better Mortgage and Citibank were held back by spotty service records.
- Navy Federal Credit Union doesn’t offer a 3% down payment option.
Frequently asked questions (FAQs)
Do bad credit mortgages have higher rates?
Yes. If you have bad credit, consider making a larger down payment, choosing a shorter term, borrowing less or buying down your rate via mortgage points.
How does having bad credit affect down payments?
Lenders may require borrowers with bad credit to put more money down upfront. In other cases, borrowers might only receive a higher interest rate.
Can FHA loans help bad credit borrowers?
Yes. However, if your score is between 500 and 579, you must make a 10% down payment.
Can I repair my credit before applying?
Yes. To repair your credit, pay your bills on time, stop new credit applications and dispute credit report errors.