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A bad credit mortgage is possible, even if you’re a first-time home buyer. These mortgage lenders offer options such as FHA loans for bad-credit, low-credit or credit-challenged borrowers.
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Last updated on February 2, 2024
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✅ Fact checked and reviewed
Edited by
✅ Fact checked and reviewed
Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.
Your credit score tells lenders how likely you are to pay back the money you borrow. A high score sends all the right signals, while a low credit score, sometimes referred to as “bad credit,” can keep you from getting approved. When it comes to buying a home, a bad credit score generally falls below 620.
The credit score needed to buy a house depends on the type of loan. Government-backed loan programs — FHA, VA and USDA — generally have lower credit score requirements than conventional mortgages. But it’s the lender that ultimately decides what the minimum credit score will be for each loan product. Many of the lenders listed below provide FHA loans for bad credit borrowers.
Lenders consider more than just credit score when evaluating a mortgage applicant. If your credit score is at or near a lender's minimum, the lender could demand a bigger down payment, charge a higher interest rate or require you to pay more fees. In short, you could end up paying more for your home loan. The best way to avoid these penalties is to elevate your credit score before you apply.
The star ratings shown are specific to the product with the lowest specified credit score minimum (for example, FHA or VA loans).
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NerdWallet's mortgage content, including articles, reviews and recommendations, is produced by a team of writers and editors who specialize in home lending. Their work has appeared in The Associated Press, USA Today, The Washington Post, MarketWatch, Newsweek and many other national, regional and local publications. They have been cited in publications including The Wall Street Journal, and appeared on NerdWallet's "Smart Money" podcast as well as local TV and radio.
Why trust NerdWallet
- 50+ mortgage lenders reviewed and rated by our team of experts.
- 40+ years of combined experience covering mortgages and financial topics.
- Objective, comprehensive star rating system assessing 120+ categories and 5,000+ data points.
- Governed by NerdWallet's strict guidelines for editorial integrity.
NerdWallet's mortgage content, including articles, reviews and recommendations, is produced by a team of writers and editors who specialize in home lending. Their work has appeared in The Associated Press, USA Today, The Washington Post, MarketWatch, Newsweek and many other national, regional and local publications. They have been cited in publications including The Wall Street Journal, and appeared on NerdWallet's "Smart Money" podcast as well as local TV and radio.
Best Mortgage Lenders for Bad Credit Home Loans
Lender ▾ ▾ | NerdWallet Rating ▾ ▾ | Min. credit score ▾ ▾ | Min. down payment ▾ ▾ | Learn more |
|---|---|---|---|---|
New American Funding: NMLS#6606 Top 3 most visited🏆Learn moreat New American Funding at New American Funding | 4.5 /5 FHA loans Best for low or bad credit scores overall | 500 | 3.5% | Top 3 most visited🏆Learn moreat New American Funding at New American Funding |
Guaranteed Rate: NMLS#2611 Top 3 most visited🏆Learn moreat Guaranteed Rate at Guaranteed Rate | 5.0 /5 FHA loans Best for first-time home buyers | 580 | 3.5% | Top 3 most visited🏆Learn moreat Guaranteed Rate at Guaranteed Rate |
Flagstar: NMLS#417490 LEARN MORE on NerdWallet | 4.5 /5 FHA loans Best for overall mortgage lending | 580 | 3.5% | LEARN MORE on NerdWallet |
Fairway Independent Mortgage: NMLS#2289 Top 3 most visited🏆Learn moreat Fairway Independent Mortgage at Fairway Independent Mortgage | 4.0 /5 FHA loans Best for customer satisfaction | 580 | 3.5% | Top 3 most visited🏆Learn moreat Fairway Independent Mortgage at Fairway Independent Mortgage |
Carrington: NMLS#2600 LEARN MORE on NerdWallet | 4.0 /5 FHA loans Best for low or bad credit scores overall | 500 | 3.5% | LEARN MORE on NerdWallet |
at New American Funding
New American Funding: NMLS#6606
4.5
FHA loans
NerdWallet rating
Min. credit score
500
Min. down payment
3.5%
Why We Like It
Good for: First-time home buyers and other borrowers looking for a broad array of loan choices.
Pros
- Offers a wide variety of purchase and refinance mortgages with an emphasis on helping underserved communities.
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
- Dedicates a significant portion of its business to FHA lending.
Cons
- FHA mortgage origination fees and interest rates tend to be on the high end, according to the latest federal data.
Read Full Review
Learn moreat Guaranteed Rate
at Guaranteed Rate
Guaranteed Rate: NMLS#2611
Min. credit score
580
Min. down payment
3.5%
Why We Like ItGood for: borrowers seeking a solid variety of FHA loan types, including FHA renovation loans.
Pros
- Displays detailed sample rates for many of its loan products.
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
- Offers a variety of FHA loans, including renovation mortgages.
- Was among the top 10 lenders by loan volume for FHA mortgages in 2022, according to the latest federal data.
Cons
- Lender's "Same Day Mortgage" offer not available for FHA loans.
Read Full Review
LEARN MORE
on NerdWallet
Flagstar: NMLS#417490
4.5
FHA loans
NerdWallet rating
Min. credit score
580
Min. down payment
3.5%
Why We Like ItGood for: borrowers who want a wide range of choices, including FHA renovation loans and refinance mortgages, and view customized rates online.
Pros
- Offers a wide range of loan types and products, including FHA renovation loans and FHA streamline and cash-out refinance mortgages.
- Borrowers can apply and track loan status online.
- Offers customized online rate quotes with monthly payment estimates.
Cons
- Does not offer FHA energy efficient mortgages.
Read Full Review
Learn moreat Fairway Independent Mortgage
at Fairway Independent Mortgage
Fairway Independent Mortgage: NMLS#2289
4.0
FHA loans
NerdWallet rating
Min. credit score
580
Min. down payment
3.5%
Why We Like ItGood for: borrowers who want access to a wide variety of mortgages, including renovation loans and ITIN loans.
Pros
- Offers a robust suite of loan products, including ITIN loans for borrowers without Social Security numbers, renovation loans, government-backed mortgages and loans for self-employed borrowers.
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
Cons
- Mortgage rates for different types of loans aren't posted online.
- Origination fees are on the high side compared with other lenders, according to the latest federal data.
Read Full Review
LEARN MORE
on NerdWallet
Carrington: NMLS#2600
4.0
FHA loans
NerdWallet rating
Min. credit score
500
Min. down payment
3.5%
Why We Like ItGood for: first-time home buyers or credit-challenged borrowers interested in government loan products.
Pros
- Offers multiple low-down-payment loan programs.
- May consider alternative credit data, such as bank statements.
- You can view customized rates for purchasing a home and apply online.
Cons
- Doesn't offer home equity lines of credit.
- Lender fees are on the high side, according to the latest federal data.
Read Full Review
LEARN MORE
on NerdWallet
Guild Mortgage: NMLS#3274
4.0
FHA loans
NerdWallet rating
Min. credit score
540
Min. down payment
3.5%
Why We Like ItGood for: borrowers seeking a lender that dedicates a significant portion of its business to FHA lending.
Pros
- Was one of the top 10 lenders by volume for FHA lending in 2022, according to the latest federal data.
- Has retail branches in most states.
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
Cons
- Origination fees for FHA loans tend to be on the high end, according to the latest federal data.
Read Full Review
Learn moreat Network Capital
at Network Capital
Network Capital: NMLS#11712
4.5
FHA loans
NerdWallet rating
Min. credit score
560
Min. down payment
3.5%
Why We Like ItGood for: borrowers looking for a lender offering a wide array of FHA loans with online convenience.
Pros
- Offers a broad selection of FHA loans.
- Provides “same-as-cash” application process designed to help borrowers compete with cash offers.
- Publishes current sample rates on its website for a variety of mortgages, including FHA loans.
Cons
- Website doesn’t provide customized mortgage rates.
- Lender origination fees for FHA loans are on the high side, according to the latest federal data.
Read Full Review
LEARN MORE
on NerdWallet
Wells Fargo: NMLS#399801
4.0
VA loans
NerdWallet rating
Min. credit score
600
Min. down payment
0%
Why We Like ItGood for: existing customers of the bank looking for a wide selection of mortgage products.
Pros
- Sample rates clearly posted for various loan products.
- Offers a wide variety of loan types and products.
- Mortgage rates tend to be on the low side compared with other lenders, according to the latest federal data.
Cons
- Home loans business is broadly focused on bank customers.
- Doesn’t offer home improvement loans, or home equity loans or lines of credit.
- Scandals and government actions have damaged consumer trust in recent years.
Read Full Review
NOTE: The minimum credit scores displayed above represent the most recent information provided to NerdWallet by each lender, and they are subject to change. The credit score shown is each lender's lowest minimum requirement across common loan types. To see a lender's minimum credit scores for specific types of home loans, click or tap the "?" next to that lender's displayed minimum credit score. Bear in mind that credit score isn't the sole factor determining whether a lender will deem a borrower qualified — variables like debt-to-income ratio and down payment amount are important, too.
How to get a mortgage with a low or bad credit score
Lenders consider four primary factors when reviewing a mortgage application:
Your credit score.
The amount of debt you carry compared to the income you receive, also called your debt-to-income ratio or DTI.
Your employment history.
The size of your down payment.
Two or three positive factors might outweigh a negative one. Here's what you can do to improve each of them and bolster your chances of getting approved for a mortgage.
1. Credit score
Your credit score can determine what types of home loans you're eligible for, how high an interest rate you'll be offered and how large a down payment you have to make.
Though you may be able to qualify for a mortgage with a credit score that's as low as 500, you might have to make a larger down payment — and you probably wouldn't get a great interest rate.
Improving your credit takes time, but a higher score can help you start off your home loan on better terms, saving you money in the long run.
» MORE: Ways to build and improve credit fast
2. Debt-to-income ratio
To calculate your debt-to-income ratio, or DTI, a lender will divide the total of your monthly debt obligations (things like car payments or student loans) by your monthly pre-tax income.
Most lenders will look for a DTI that's 36% or lower (including your housing costs). A lender that qualifies you with a higher DTI is probably charging you a higher interest rate.
You can lower your DTI by paying down existing debts. While you're getting ready to buy a house, and during the homebuying process, you should avoid taking on any additional debts or making any major purchases.
» MORE: See how much you could borrow to buy a home
3. Employment history
You can't change your employment history, but you can do your best to make sure your employment status is steady before you begin applying for mortgages. If you change jobs during the underwriting period, it can impact how much a lender is willing to loan you.
» MORE: What is mortgage underwriting?
4. Down payment
The amount of down payment you'll need depends on what type of home loan you're getting. If you are affiliated with the military, you may be able to qualify for a mortgage backed by the Department of Veterans Affairs. VA loans allow zero down payment. USDA loans, which are insured by the U.S. Department of Agriculture and meant to help lower-income borrowers living outside of urban areas, also have no down payment requirement.
Loans backed by the Federal Housing Administration can be beneficial to borrowers with lower credit scores because FHA loans tend to allow lower minimum credit scores. If your credit score is at least 580, you may be able to make a down payment that is as low as 3.5%. FHA loans also allow borrowers to use gift money to go toward the down payment.
If you are able to make a higher down payment, that may help offset a lower credit score in the eyes of your lender. State-sponsored first-time home buyer programs offer down payment assistance and grants that can enhance your borrowing power.
» MORE: How to get down payment assistance when buying a house
The bottom line? Shop around. You may qualify for a home loan with some lenders but not others, and you'll want to compare the different offers. Look closely at the rates, fees and other requirements to see which mortgage lender is offering you the best deal.
More from NerdWallet:
Calculate your mortgage payment
Compare mortgage rates
Tips for finding the best mortgage lender
Last updated on February 2, 2024
Methodology
The star ratings on this page reflect each lender's rating for FHA products (read more about how we determine FHA ratings) or VA products (read more about how we determine VA ratings). The lenders on this page are chosen using this methodology:
NerdWallet reviewed more than 50 mortgage lenders, including the majority of the largest U.S. mortgage lenders by annual loan volume (lenders had to have at least a 1% market share), lenders with significant online search volume and those that specialize in serving various audiences across the country.
For inclusion in this roundup, lenders need to share credit score requirements with NerdWallet or post that information on their websites, and offer at least one loan product where the stated credit score minimum is 600 or lower. Additionally, the lender must offer at least one product or feature that accommodates borrowers with lower credit scores. This product or feature needs to be in addition to or separate from offering government-backed loans.
NerdWallet solicits information from reviewed lenders on a recurring basis throughout the year. All lender-provided information is verified through lender websites and interviews. We also utilized the most recent Home Mortgage Disclosure Act data for origination volume, origination fee, average interest rate and share-of-product data.
NerdWallet's Best Mortgage Lenders for Bad Credit Home Loans of February 2024
- New American Funding: Best for low or bad credit scores overall
- Guaranteed Rate: Best for first-time home buyers
- Flagstar: Best for overall mortgage lending
- Fairway Independent Mortgage: Best for customer satisfaction
- Carrington: Best for low or bad credit scores overall
- Guild Mortgage: Best for government-backed mortgages
- Network Capital: Best for self-employed borrowers
- Wells Fargo: Best for mortgage rates
Frequently asked questions
Can I get a home loan with a 500 credit score?
A 500 is the absolute lowest credit score needed to buy a house. On paper, that score enables you to qualify for a loan backed by the Federal Housing Administration with a 10% down payment. In reality, however, few lenders will accept a score that low. Bringing up your credit score can give you more loan options, get you a lower interest rate and allow you to make a smaller down payment.
What mortgage lenders will work with bad credit?
Mortgage lenders' requirements for borrowers vary, but if you have bad credit you should look for lenders that are willing to consider alternative credit data. That means they will review aspects of your financial situation, like on-time rent and utility payments, that aren’t normally reported to the credit bureaus. You'll have to provide the lender with documentation of this info.
Can you still get a mortgage with a low credit score?
Yes. Having a stable employment history and saving up a larger down payment can help offset a weaker credit score. Some kinds of mortgages, like FHA loans, have lower minimum credit score requirements. That said, if you can build your credit first, it will help you not only get a mortgage but also get a better interest rate. That can potentially save you thousands of dollars.
What is the easiest mortgage to qualify for?
The easiest mortgage to qualify for depends on you. While FHA loans are known for allowing lower minimum credit scores, a VA loan or a USDA loan may be easier to qualify for if you fit their requirements. For a VA loan you need to be an active or retired member of the military or a military spouse. USDA loans have income and location requirements.
