Mortgages for bad credit are the same as traditional mortgages, just with different requirements. For instance, mortgages for bad credit may be available to people with credit scores as low as 500, although credit scores of 580 to 620 are more common. There are many mortgage lenders for bad credit offering flexible qualifications and various loan types (e.g., FHA, VA, and conventional).
The best mortgage lenders for bad credit have mortgage programs specifically designed for people with less-than-perfect credit scores. Although your APR will likely be higher than if you had great credit, the best mortgage lenders for bad credit offer competitive rates. Plus, you can always refinance into a lower-rate mortgage once your credit improves.
Best Mortgage Lenders for Bad Credit of 2021
- Best Overall: Rocket Mortgage
- Best Online Option: Better Mortgage Corporation
- Best for FHA Mortgages: Wells Fargo Bank
- Best for VA Mortgages: Veterans United Home Loans
- Best for 30-Year Mortgage: Network Capital
- Best for Refinancing: Ally Bank
- Best for Under 600 Credit Score: Navy Federal Credit Union
- Best for First-Time Home Buyers: Bank of America
Best Overall : Rocket Mortgage
No matter where you live in the United States, you can get financing from Rocket Mortgage, as long as you have a credit score of 580 or better.
Available in all 50 states
Credit scores as low as 580
Conventional, FHA, and VA loans
No adjustable-rate mortgages
Can’t meet with a loan officer in person
Rocket Mortgage is the overall best mortgage lender for bad credit since you might get approved with credit scores as low as 580 to 620. The company is highly transparent about what it takes to qualify for and get a mortgage, has a quick and easy online application, and offers financing to people in all 50 states plus the District of Columbia.
To qualify with Rocket Mortgage, you’ll need a credit score of at least 580, although a score of 620 or better is usually preferred. Plus, you’ll need to demonstrate your ability to repay the loan via a debt-to-income (DTI) ratio of no more than 45%.
Down payments with Rocket Mortgage usually range from 3% to 20%. However, your down payment could be as low as 0% if you opt for a VA loan.
To apply for a mortgage with Rocket Mortgage, you’ll need to submit an online application. Then, a home loan expert will call you to discuss the details and next steps. Since Rocket Mortgage is an online lender, you won’t be able to apply in person.
Best Online Option : Better Mortgage Corporation
Better Mortgage has a simple online application that can be completed in three minutes without impacting your credit unless you decide to get the mortgage, making it easy to see if you qualify. Plus, people with credit scores as low as 620 might be able to get financing.
Pre-qualification won’t impact your credit
Origination fees aren’t charged
Variable-rate mortgages are available
Financing unavailable in HI, MA, NH, and NV
VA and USDA loans aren’t available
Minimum down payments aren’t disclosed
Better Mortgage Corporate is a fully online lender that offers financing in 46 states. The company uses a soft credit check, which means you can find out if you qualify without hurting your credit further.
You may be able to qualify for a home mortgage with Better if you have a credit score as low as 620. In addition to considering your credit history, Better also looks at how easily you can repay the loan. You can expect to need a DTI of no more than 45% to 50% to qualify.
Better doesn’t disclose its specific down payment requirements, but you will likely need a down payment of at least 5% to 20% to qualify (possible as little as 3.5% with an FHA loan). It will order an appraisal to confirm the value of the home and whether your down payment is sufficient.
It takes about three minutes to complete Better’s online home mortgage application, and you’ll get a loan estimate as soon as it’s submitted. Better uses a soft credit check to pre-qualify you, meaning it won’t impact your credit score. If you decide to move forward, Better will complete a hard credit check as a part of its underwriting process.
Since Better is an online lender, you can’t meet with anyone from the company in person.
Best for FHA Mortgages : Wells Fargo Bank
Wells Fargo is one of the largest banks in the U.S. and offers FHA loans in all 50 states. Not only is its online application simple to complete, but it’s also possible to apply for an FHA loan in person at one of Wells Fargo’s branch locations if you have questions.
You can qualify with an unrelated co-applicant
FHA loans are available nationally
Apply online or in-person
Minimum credit scores aren’t disclosed
DTI requirements aren’t disclosed
Physical branch locations aren’t in every state
Not only can you apply for an FHA loan with Wells Fargo online in all 50 states, but it also has full-service branches in 36 states and the District of Columbia. This is a bonus for individuals who want to meet with a loan officer in person to apply for an FHA loan.
To qualify for an FHA loan with Wells Fargo, your down payment may be as low as 3.5%. Wells Fargo will let you qualify with the assistance of a co-applicant, even if the individual doesn’t live with you. This can potentially be a good option if your credit isn’t good enough for you to qualify on your own.
Wells Fargo doesn’t disclose its minimum credit score or DTI requirements for FHA loans. However, FHA guidelines allow credit scores as low as 500 to 580 (few FHA lenders actually go as low as 500), with DTIs as high as 40% to 50%. Keep in mind, the lower your credit score, the better your DTI and down payment will need to be to compensate for the risk associated with your credit history.
You can apply for a mortgage with Wells Fargo entirely online. You can also for an FHA loan by phone or in-person by meeting with a mortgage consultant if there is a Wells Fargo branch in your area.
Read the full Wells Fargo Bank review.
Best for VA Mortgages : Veterans United Home Loans
Not only is Veterans United Home Loans one of the largest VA loan originators in the nation, but it is highly transparent about its process, offers financing in all 50 states, and has branches in 17 states.
Zero down payments loans are possible
Branch locations in 17 states
One of the highest-volume VA lenders
Credit scores of 640 or better often required
Focuses solely on VA loans
Only offers 15- or 30-year fixed-rate terms
Veterans United Home Loans is one of the largest originators of VA loans, offers mortgages in all 50 states, and has branch locations in 17 states. The company focuses solely on VA loans and clearly defines what a VA loan is and what it takes to get one, making it stand out from the competition.
One of the best features of a VA loan is that you often don’t need to make a down payment. You will need to meet the VA’s eligibility requirements and be a current or former military member. Although Veterans United Home Loans doesn’t have strict credit score requirements (the VA doesn’t have any minimum credit score requirements), you’ll likely need a credit score of at least 640 to qualify. This makes a VA loan a potentially good option for eligible veterans without a perfect credit history.
The application for a VA loan with Veterans United Home Loans is entirely online. When you apply, some of the documents you may need to provide include copies of your government identification, form DD-214, a points statement if you’re a Reservist or serve in the National Guard, a statement of service for those in active duty, two years of W-2s, recent pay stubs, recent bank statements, and any disability awards letters.
Best for 30-Year Mortgage : Network Capital
You can get three different types of 30-year mortgages from Network Capital (conventional, FHA, or VA), even if you have a low credit score.
Three types of 30-year mortgages
DTIs up to 60% for VA loans
Closing in as few as 15 days
Only available in 23 states
Only offers 15 and 30-year fixed-rate terms
Doesn’t offer USDA loans
Network Capital is an online lender offering mortgages in 23 states and the District of Columbia. If you live within its lending footprint, Network Capital offers conventional, FHA, and VA 30-year, fixed-rate mortgages, with low minimum credit scores ranging from 580 to 620.
Network Capital offers a variety of 30-year fixed-rate mortgage options that are good for people with bad credit, including conventional, FHA, and VA loans. Here’s what you can expect to need to qualify for each type:
- Conventional loan: You’ll need a 620 or better credit score and a DTI of 36% or better. Network Capital doesn’t disclose the minimum down payment requirements. However, lenders usually require borrowers with worse credit to make larger down payments.
- FHA loan: You’ll need a credit score of at least 580 and may be able to make a down payment as low as 3.5%. Although Network Capital doesn’t disclose a specific DTI requirement, DTIs on FHA loans usually can’t exceed 40% to 50%.
- VA loan: You’ll need a credit score in the low-to-mid 600s or better and a DTI of no greater than 60%. As is typical with VA loans, a down payment might not be required.
It only takes minutes to apply for a conventional, FHA, or VA loan from Network Capital, which will be completed entirely online. Depending on how long it takes to get an appraisal, you may even be able to close your loan in as few as 15 business days. This is much quicker than the 45 to 60 days or more that’s typical for the industry.
Best for Refinancing : Ally Bank
Individuals with less-than-perfect credit can potentially qualify for a conventional mortgage refinance with Ally Bank since it has a low minimum credit score requirement of 620.
You won’t pay any lender fees
ARMs are available
Soft credit check to get pre-qualified
Only available in 37 states
Most equity requirements aren’t disclosed
In-person appointments aren’t available
Ally Bank is a fully digital bank that offers a wide variety of mortgage loans, including refinancing options. Plus, it offers a full suite of online banking products, like deposit accounts, consumer loans, and more. Ally Bank is a great option if you’re looking for a conventional loan refinance since its minimum credit score requirement is only 620.
Per a conversation with Ally’s customer service team, while mortgages are only available in 37 states, the company is actively working on expanding its lending footprint.
As noted, you’ll need a credit score of at least 620 to qualify for a conventional mortgage refinance with Ally Bank. While Ally Bank doesn’t disclose most of its equity requirements, you’ll likely need to keep at least 20% equity in your home to qualify for a cash-out refinance loan.
The application for a mortgage refinance with Ally Bank is online. It takes as few as 15 minutes, and you’ll get an immediate quote, after which time you can lock your rate.
Applying won’t affect your credit score, as Ally Bank uses a soft credit check to pre-qualify you. The lender won’t order a hard credit check until you decide to proceed. This is an especially nice feature for individuals with bad credit since applying won’t further hurt your credit.
As a fully digital bank, Ally doesn’t have any physical branch locations. However, it offers 24/7 access to online customer support.
Read the full Ally Bank review.
Best for Under 600 Credit Score : Navy Federal Credit Union
- Minimum Credit Score: No specific requirement
- Minimum Down Payment: 0% to 5%
- Online Application: Yes
Membership is open to military members and their relatives and household members in all 50 states. Plus, Navy Federal Credit Union doesn’t have any credit score minimums, something that’s helpful for individuals with bad credit scores of 600 or less.
Loans are available in all 50 states
Flexible credit qualifications
No down payment options
Limited physical branch locations
FHA and USDA loans aren’t available
Must meet credit union membership criteria
Although you need to be a Navy Federal Credit Union member to apply for a mortgage loan, it’s easy to qualify for membership. You simply need to be a current or former member of any branch of the armed forces, one of their relatives (e.g., parent, sibling, or child), or a household member (e.g., a roommate). Plus, loans are available in all 50 states and there are no minimum credit score requirements.
Navy Federal Credit Union doesn’t have any specific credit score requirements when evaluating you for a mortgage. Rather, it considers such factors as your job history (you should have at least two years of consecutive work experience), how easily you can repay your loan (lenders often look for DTIs of at least 36% to 43%), and your overall credit history.
The fact that Navy Federal Credit Union doesn’t have strict criteria can be good for people with credit scores of 600 or below since credit history is only one of the factors it considers when qualifying you.
In addition, you might be able to qualify for a loan from Navy Federal Credit Union with down payments as low as 0% to 5%. Military members and first-time homebuyers may benefit from a 0% down payment loan, whereas conventional fixed-rate mortgages carry a down payment of at least 5%.
To get pre-approved with Navy Federal Credit Union, you’ll apply online. To expedite the process, collect your W-2s and tax returns from the most recent two years, pay stubs for the most recent one to three months, a detailed listing of your monthly debt payments and living expenses, and bank account numbers so Navy Federal Credit Union can verify your assets.
You’ll be able to upload all of your documents online, use a personalized checklist to help you remember the things you need to do, receive notices when key milestones of the loan process have been achieved, and track your loan status online 24/7. Plus, you may be able to schedule an in-person meeting at one of Navy Federal Credit Union’s 340 branches.
Read the full Navy Federal Credit Union review.
Best for First-Time Home Buyers : Bank of America
Bank of America offers many loan programs for first-time homebuyers, including FHA and VA loans with flexible guidelines for individuals with less-than-perfect credit. Plus, it offers many educational resources for first-time homebuyers, making it stand out from the competition.
Mortgages available nationally
First-time homebuyer education resources
Conventional, FHA, and VA loans
Minimum credit scores aren’t disclosed
Low DTI requirement of 36%
Rates on FHA and VA loans aren’t published
If you’re a first-time homebuyer with bad credit, Bank of America might be a good option, particularly if you don’t have much other debt and have plenty of cash on reserve. While the bank doesn’t disclose its minimum credit scores, it offers FHA and VA loans with flexible credit requirements. Plus, it has many educational resources designed for new homebuyers.
To qualify you for a mortgage, Bank of America considers a wide variety of factors including your credit history (minimum credit score isn’t disclosed), how easily you can repay the loan, how much your home is worth (down payments can range from 0% to 20%), and how much cash you have on reserve.
A bad credit score doesn’t necessarily mean you won’t qualify for a mortgage since Bank of America. You’ll have the best odds of getting approved if you opt for a government-insured loan, like a VA loan or an FHA loan, since the qualifications are more flexible than with conventional loans.
You can apply for a mortgage with Bank of America completely online in about five minutes. Once you’ve applied, a lending specialist will work with you throughout the entire process. Plus, you’ll be able to manage the entire process online. You can even meet with a loan specialist in person at one of Bank of America’s physical branches.
Read the full Bank of America review.
If you have bad credit and are looking for a mortgage, there are many options depending on your situation. The first step is to find a lender that offers financing in your area. Then, you’ll need to find a mortgage lender willing to approve people with bad credit and that offers the type of loan you want (e.g., conventional or government-insured by the FHA, VA, etc.).
Rocket Mortgage is the overall best mortgage lender for bad credit because you may be able to qualify for a mortgage with a credit score as low as 580 to 620 and make a down payment of 0% to 20%. Plus, mortgages are available in all 50 states and it’s easy to apply online for conventional and government-insured loans.
Compare the Best Mortgage Lenders for Bad Credit
|Company||Minimum Down Payment||Minimum Credit Score||Application Process||No. States Available|
|0% to 20%||580 to 620||Online||50|
|Better Mortgage Corporation
Best Online Option
|Wells Fargo Bank
Best for FHA Mortgages
|Veterans United Home Loans
Best for VA Mortgages
Best for 30-Year Mortgage
|0% to 3.5%||580 to 620||Online||24|
Best for Refinancing
|20% equity for cash-out refinance||620||Online||37|
|Navy Federal Credit Union
Best for Under 600 Credit Score
|0% to 5%||No specific requirement||Online||50|
|Bank of America
Best for First-Time Home Buyers
|0% to 20%||Not disclosed||Online||50|
Guide to Choosing the Best Mortgage Lender for Bad Credit
What Is a Good Down Payment for a Mortgage for Bad Credit?
A good down payment on a mortgage for people with a bad credit score of less than 580 is at least 10%. If you’re on the cusp of fair credit (580+), it makes sense to try to improve your credit score before applying for a mortgage. It could be possible for people with a fair credit score of 580 or better to qualify for a mortgage with a down payment as low as 3.5%.
Note that private mortgage insurance (PMI) is typically required for mortgages with down payments of less than 20%, which increases the overall borrowing costs.
What Types of Mortgages Can I Get if I Have Bad Credit?
There are various types of mortgages people with bad credit can get, including conventional loans and government-backed loans from the FHA, USDA, and VA.
Government-backed mortgages from the FHA, USDA, and VA are usually the best options for people with bad credit since these mortgage programs have low or no minimum credit score requirements, making it easier to qualify. Plus, although FHA loans require people with credit scores of 500 to 579 to have a down payment of at least 10%, the USDA and VA might not require any down payment and also don’t have a minimum credit score requirement.
In addition to government-backed loans, it may be possible for people with bad credit to qualify for a conventional loan. For conventional loans backed by Fannie Mae and Freddie Mac, you may be able to qualify with a credit score as low as 620.
Plus, some lenders, including banks and credit unions, offer non-conforming conventional loan (aka, “portfolio loan”) programs that aren’t sold to Fannie Mae and Freddie Mac. These lenders may be able to offer terms that are more favorable for people with bad credit since they’re not required to adhere to the strict standards required by the conventional loan programs backed by Fannie and Freddie.
How to Choose a Mortgage Lender for Bad Credit
When you’re ready to purchase a home and you have bad credit, getting approved comes down to finding a lender with flexible underwriting criteria that offers a variety of loan programs. Here’s what to look out for when looking for the best mortgage lender for bad credit.
- Low or flexible credit score requirements: Look for a lender that either doesn’t have a minimum credit score requirement or has a low one of 580 to 640. Lenders often look at factors other than credit scores when qualifying you. If you have good compensating factors, like a low DTI ratio or a large down payment, the lender may be willing to lend to you even if you don’t have a great credit score.
- A government-insured loan: One of the ways lenders manage the risk of low credit scores is via government-insured loans, like those offered by the FHA, VA, and USDA. If you have a low credit score, you might consider getting one of these loans.
- APR: Remember that APRs are based on risk. Most of the starting APRs published by lenders assume the borrower has a good credit score and a sizeable down payment. Lenders use risk-based pricing to set APRs, meaning well-qualified borrowers will get the best rates. To get the best possible rates, work steadily on improving your credit.
Guide to Mortgage Rates for Bad Credit
What Is a Typical Mortgage Rate for Bad Credit?
If you have bad credit, you can expect your mortgage rate to be at least 1.5% more than what you would pay if you had excellent credit. To put this into context, mortgage rates by credit score for a $250,000 mortgage with an 80% loan-to-value (LTV) and a 30-year fixed-rate on a single-family home are estimated as follows (note that “fair” credit scores of 660 or less are often considered bad credit):
|FICO Score Range||Classification||Estimated APR|
|760 to 850||Very Good to Exceptional||2.387%|
|700 to 759||Good to Very Good||2.609%|
|680 to 699||Good||2.786%|
|660 to 679||Fair to Good||3%|
|640 to 659||Fair||3.43%|
How Do Mortgage Rates for Bad Credit Differ From Other Mortgage Rates?
Mortgage rates for loans made to people with bad credit are at least 1.5% higher than other mortgage rates (as of January 2021). This is because there is a higher risk that people with bad credit won’t repay their loans as agreed.
By charging a higher rate, the lenders are protecting themselves from future losses. The reason is that the lender will earn more interest income on all of the loans they make to borrowers with bad credit. Some of this income is set aside as reserves to cover potential losses if and when they occur.
The government requires financial institutions to set aside more reserves for loan losses for riskier loans. There are holding costs associated with these reserves since the money set aside can’t be used for other purposes (e.g., making more loans). Financial institutions cover some of these holding costs by charging higher rates for riskier loans, and sometimes even by limiting the amount of higher-risk loans they’ll make.
They also make up for this risk by selling conventional loans to Fannie Mae and Freddie Mac and by offering government-backed mortgage loans.
Frequently Asked Questions
What Is the Lowest Credit Score Needed to Buy a House?
You can potentially get a mortgage to buy a house if you have a credit score of 500, the lowest credit score needed to qualify for a mortgage insured by the Federal Housing Administration (FHA). However, a down payment of at least 10% is required for people with credit scores between 500 and 579. People with credit scores of 580 or better can potentially qualify for an FHA loan with a down payment as low as 3.5%.
If you live in a rural area, meet income-eligibility requirements (your income is 115% or less than the area’s median household income), and have bad credit, you might also be able to qualify for a USDA loan because there are no minimum credit score requirements. Instead, you need to show that you’re willing and able to handle and manage your debt. Applications could include those who:
- Have bad credit because of a non-recurring issue (e.g., medical debt) have handled all of their other debt appropriately
- Don’t have any credit history can prove their willingness and ability to handle and manage debt through other sources (e.g., rent payments).
Another potential option for veterans and military service members with bad credit is a VA loan, a loan backed by the U.S. Department of Veterans Affairs (VA). The VA doesn’t have a minimum credit score threshold; rather, lenders are required to evaluate your entire credit situation to determine if you qualify. This is good if your credit issues aren’t likely to continue in the future.
Keep in mind, most government-backed loan programs (e.g., FHA, USDA, and VA) are offered by mortgage lenders that may establish more stringent credit score requirements. This means even though the USDA and VA don’t have minimum credit score requirements, and the FHA allows for credit scores as low as 500, each lender might have a different credit score policy. It’s common for these lenders to require minimum credit scores ranging from 580 to 620.
To qualify for conforming conventional loans backed by Fannie Mae and Freddie Mac, you’ll typically need a credit score of at least 620 to 700 to qualify. However, it’s not unusual for lenders who offer conventional loans to require credit scores of 740 or better. Plus, although you might be able to get approved for a conforming conventional loan with a down payment as low as 3%, similar to FHA loans, a larger down payment may be required for people with lower credit scores.
Why Are Mortgage Rates Higher If I Have Bad Credit?
If you have bad credit, you’ll pay a higher mortgage rate because the lender is taking on more risk by offering a mortgage to you. This is particularly true in the case of subprime mortgages, which are often characterized by borrowers with bad credit (i.e., FICO scores of 660 or less), limited equity in their homes, and high debt-to-income ratios. Since it’s more likely that people with bad credit will default on their mortgages, lenders charge higher rates to compensate for these potential losses.
One of the best and most affordable mortgages for people with bad credit is an FHA loan. This is because FHA loans typically allow for lower credit scores than conventional loans and require relatively small down payments. Plus, lenders are more willing to give you better terms because the FHA provides them with a guarantee that it will cover some of the lender’s losses if you don’t repay your loan as agreed.
Can Having a Larger Down Payment Help Me Get a Mortgage If I Have Bad Credit?
The larger the down payment, the easier it is for people with bad credit to qualify for a mortgage. Additionally, if you have extra money to put toward a down payment, it will be easier to qualify for a mortgage if you have bad credit.
It’s important to remember that people with down payments of less than 20% typically need to pay PMI. The PMI cost is added to your payment and provides your lender with protection if you don’t repay your loan as agreed. Not only does this increase the overall cost of your loan, but your lender might also include this cost in its calculation of your debt-to-income ratio. This is important because it’s easier to qualify for a mortgage if you have a lower DTI ratio.
Can I Get a Mortgage Refinance If I Have Bad Credit?
It is possible to refinance your mortgage if you have bad credit. In addition to conventional loans backed by Fannie Mae and Freddie Mac, you might also be able to qualify for FHA loans, USDA loans, or VA loans backed by the U.S. government. The process of qualifying for a mortgage refinance with these loan programs is often the same as a new home purchase. However, a refinance might be easier if you already have a mortgage through the program or with the same lender, such as an existing FHA loan.
For example, borrowers with existing FHA loans who meet certain conditions can use the FHA’s streamline refinance program to refinance their loans under “credit qualifying” and “non-credit qualifying” options. To be eligible for the streamlined refinance program, borrowers must:
- Have an existing FHA loan
- Be current on all mortgage payments (the loan cannot be delinquent)
- Receive a net tangible benefit after the refinance (for example, the interest rate or term or the refinances loan needs to be better than the original loan)
- Not take out more than $500 in additional cash loan proceeds
Note that there are often costs associated with mortgage refinances, such as appraisals, title work, origination fees, and points. That said, it’s important to weigh the costs you’ll incur with the benefits you’ll receive before you decide to refinance your debt.
Also, lenders will consider the reason you’re requesting a mortgage refinance before making their lending decisions. If the refinance will put you in a worse financial position (e.g., you take out more debt and end up with a higher loan-to-value ratio), then you might not be approved for the refinance. Likewise, lenders might not be willing to refinance a loan that’s already delinquent as it might be considered too risky and could put the lender in a worse position.
If you need to refinance your mortgage because you’re having trouble making your payments, there are other things you can do besides seeking a refinance. For example, you could talk to your lender about permanently modifying your loan, giving you a temporary loan forbearance to reduce or stop your payments, or even setting up a payment plan so you can get back on track.
We considered about two dozen providers in our review of the best mortgage lenders for bad credit. Our search included lenders that offer flexible credit criteria and many different loan types. We also considered factors including APR, application process, DTI, and other features such as reputation, nationwide availability, and in-person branches.