14 Best Home Loans for Low or Bad Credit Scores of December 2024
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Yes, you can still get a mortgage if your credit score is below 620. Expect some tradeoffs, though: It’s likely you’ll need a larger down payment or pay more in interest and fees.
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14 Best Home Loans for Low or Bad Credit Scores of December 2024
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Lender ▾ ▾ | NerdWallet Rating ▾ ▾ | Min. credit score ▾ ▾ | Min. down payment ▾ ▾ | Learn more |
|---|---|---|---|---|
580 | 3.5% | Learn more at First Federal Bank | ||
620 | 5% | Learn more at Northpointe | ||
 Guild Mortgage: NMLS#3274 LEARN MORE on NerdWallet | 540 | 3.5% | LEARN MORE on NerdWallet | |
 State Employees' Credit Union: NMLS#430055 LEARN MORE on NerdWallet | N/A | 0% | LEARN MORE on NerdWallet | |
 loanDepot: NMLS#174457 LEARN MORE on NerdWallet | 520 | 3.5% | LEARN MORE on NerdWallet |
First Federal Bank: NMLS#408902
580
3.5%
- Almost a quarter of all loans last year were FHA loans.
- Average mortgage rates are on the lower side, according to the latest federal data.
- Offers 15-, 20-, 25-, and 30-year repayment terms, which is unusually flexible.
- No dedicated mobile app for mortgage borrowers.
- Some loans are geographically limited.
Northpointe: NMLS#447490
620
National
- Offers government-backed FHA and VA loans, including refinancing options, and USDA loans.
- Jumbo loans available for vacation homes and investment properties.
- Offers programs for borrowers with credit challenges, self-employed borrowers and professionals early in their careers who may still carry significant debt.
- You’ll need to provide contact information or speak to a loan officer for customized mortgage rates.
- Origination fees are on the high side, according to the latest federal data.
- Doesn’t offer home equity loans or lines of credit.
- Offers several programs to make homeownership more accessible.
- Offers loans for manufactured homes.
- Renovation loan options are available.
- Does not publish interest rates online.
- No mortgage mobile app.
- Loans are not available in every state.
State Employees' Credit Union: NMLS#430055
N/A
0%
- Offers a no-down-payment mortgage without private mortgage insurance.
- Participates in multiple first-time buyer assistance programs.
- Very low average mortgage rates, according to the latest federal data.
- Credit union membership eligibility is limited.
- Loans only available in five states.
- Doesn’t offer government-backed mortgages.
- Offers a variety of repayment terms for fixed-rate loans.
- Does a substantial amount of business in FHA lending.
- mello smartloan product can streamline mortgage application, appraisal and title search.
- Interest rates are not available on the website.
- Can't apply for a mortgage on the lender's mobile app.
- Offers closing cost assistance.
- Wide variety of loan types, including renovation, refinance and energy-efficient FHA loans.
- Lends a high volume of government-backed loans."
- Loans are not available in all states.
- Rates are not posted online.
- Does not have a mobile app.
CrossCountry Mortgage: NMLS#3029
500
3.5%
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
- Qualified borrowers can receive up to $6,500 in down payment assistance.
- High market share of FHA loans.
- Doesn’t post rates online.
- No mobile app.
- A temporary buydown program lowers buyers’ interest rates in their first year.
- Offers low rates compared with other lenders, according to the latest federal data.
- Average origination fees are on the high side compared to other lenders, according to the latest federal data.
- Mortgage rates are not published online.
- Doesn’t originate mortgages in the state of New York.
Newrez: NMLS#3013
580
3%
National
- Accepts history of bad credit, foreclosure or bankruptcy.
- Flexible options for self-employed borrowers.
- Fairly high portion of business dedicated to FHA loans.
- Doesn’t post mortgage rates online.
- Online chat not available for customer service.
- No construction or renovation loans.
- Reported average time to close (20-30 days) is faster than industry standard.
- Offers down payment assistance to first-time home buyers.
- The lender’s mobile app is focused on banking, not mortgages.
- Some loans and programs are restricted by area.
- Fully underwritten mortgage approval in as little as one day for qualified borrowers.
- Generous selection of mortgages, including renovation loans.
- Doesn't offer customer service chat with a live agent.
- Reported average time to close is 20 days, far below the industry average.
- Offers FHA energy-efficient mortgages.
- Also offers non-QM loans and ITIN loans, which have flexible qualifying guidelines.
- The lender’s website offers limited loan details.
- Interest rates are on the lower end compared to other VA lenders.
- Offers VA Interest Rate Reduction Refinance loans (VA IRRRL).
- Sample interest rates are posted online.
- Does not offer VA cash-out refinancing.
- Does not offer VA renovation loans.
- Considers borrowers with bad credit, foreclosure or bankruptcy.
- Accepts self-employed borrowers.
- FHA interest rates are on the low side, according to the latest federal data.
- FHA origination fees are on the high side, according to the latest federal data.
- Doesn’t post interest rates online.
- No online chat for customer service.
NOTE: The credit scores in this list represent the most recent information provided to NerdWallet and are subject to change. To see a lender's credit score minimums for other loan types, tap the "?" in the credit score column.
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.
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.
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.
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:
Last updated on December 20, 2024
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.
Methodology
The star ratings on this page reflect each lender's rating for FHA products (read more about how we determine FHA ratings), conventional loans (read more about how we determine conventional loan 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 40 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 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 2023 Home Mortgage Disclosure Act data for origination volume, origination fee, average interest rate and share-of-product data.
NerdWallet's Best Home Loans for Low or Bad Credit Scores of December 2024
- First Federal Bank: Best for traditional lending experience
- Northpointe: Best for borrowers overcoming credit challenges
- Guild Mortgage: Best for borrowers with nontraditional credit
- State Employees' Credit Union: Best for credit union experience
- loanDepot: Best for variety of loan types
- PrimeLending: Best for fixer-uppers
- CrossCountry Mortgage: Best for down payment assistance
- AmeriSave: Best for FHA loans
- Newrez: Best for conventional loans
- Flagstar: Best for low or bad credit scores overall
- Rate: Best for fast preapproval
- Network Capital: Best for niche loans with flexible qualification
- Wells Fargo: Best for VA loans
- Carrington: Best for history of bankruptcy
