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Best Mortgage Lenders for Bad Credit for March 2024

Review Updated
Christy Bieber
Steven Porrello
By: Christy Bieber and Steven Porrello

Our Mortgages Experts

Nathan Alderman
Check IconFact Checked Nathan Alderman
Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

It may not be easy to land a mortgage when you have a low credit score, but it's certainly not impossible. While conventional loans typically require a minimum credit score of 620, many government-backed loans allow scores as low as 580 -- and sometimes even lower than that, especially if you have a hefty down payment or low debt-to-income (DTI) ratio.  

If your credit score falls below the 620 mark, read on to learn our shortlist of best mortgage companies for poor credit and how to get a mortgage with a low credit score. 

TIP

What kind of credit score do I have?

For reference, credit scores range from 300 to 850 and are categorized by Experian as the following: 

  • Poor: 300 - 580
  • Fair: 580 - 669
  • Good: 670 - 739
  • Very good: 740 - 799
  • Exceptional: 800 - 850 

Best for: Best for low fees

Rating image, 5.0 out of 5 stars.
5.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Bottom Line

No lender fees for existing customers, along with a fully online experience make it a top pick. One of the rare lenders to offer jumbo loans up to $30 million. Axos also offers a mortgage with rewards, giving up to 3% cash back every year.

Min. Credit Score 580 FHA loans 620 other mortgage products

  • 620

Min. Down Payment

  • 3%

Key Features

  • Lender fee waiver for existing customers
  • Jumbo and super jumbo loans
  • HELOC and home equity line of credit offerings

Loan Types

  • Conventional
  • FHA
  • VA
  • Jumbo
  • Interest Only

Fixed Rate Terms

  • 30y, 20y, 15y, 10y

Adjustable Rate Terms

  • 10/6, 7/6, 5/6

Best for: Best for online experience

Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Bottom Line

Ally is limited in loan options compared to competitors, but it's all about efficiency and a speedy online experience. Ally states that applicants can get pre-approved in as little as three minutes and loans close up to 10 days faster than the industry average. Applicants with credit scores as low as 500 can qualify for a FHA loan with a 10% down payment.

Min. Credit Score 620 Conventional 700 Jumbo

  • 500-700

Min. Down Payment

  • 3%

Key Features

  • Fast pre-approval
  • Easy loan option comparison
  • Fully online application
  • Loans for first-time buyers

Loan Types

  • Conventional
  • Jumbo
  • Interest Only

Fixed Rate Terms

  • 15y, 20y, 30y

Adjustable Rate Terms

  • 5/6, 7/6, 10/6
Award Icon 2024 Award Winner
Carrington Mortgage Services

Best for: Best for custom mortgages

Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Bottom Line

Carrington has a wide selection of mortgage products and terms, and can find solutions for borrowers with bad credit or nontraditional income. Carrington has launched an app to manage the home-buying process as well as a personalized dashboard.

Min. Credit Score 500 VA and USDA 580 FHA 620 Conventional

  • 500 - 620

Min. Down Payment 0% VA loans 3% conventional loans 3.5% FHA loans

  • 0% - 3.5%

Key Features

  • Loans for borrowers with low credit
  • Low down payment options
  • Accepts nontraditional proof of income

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA

Fixed Rate Terms

  • 15y, 30y

Adjustable Rate Terms

  • 5/1, 7/1, 10/1

Best for: Best for rate lock

Rating image, 3.5 out of 5 stars.
3.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Bottom Line

With programs for first-time home buyers and down payment assistance, Guild is worth checking out for most people, especially first-time buyers. Guild is one of the top independent mortgage lenders in the nation.

Min. Credit Score

  • 540 (FHA)
  • 620 (Conventional)

Min. Down Payment 3% Conventional 0%-3.5% FHA, USDA loans, & VA loans

  • 0% - 3.5%

Key Features

  • Great for first-time buyers
  • Fast closing
  • Offers a wide range of loans including its own unique customized loans
  • Offers loans for no or low credit

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA
  • Jumbo
  • Reverse

Fixed Rate Terms

  • 10 - 30 years

Adjustable Rate Terms

  • 5y, 7y, 10y

Best for: Best for lender credits and guarantees

Rating image, 4.5 out of 5 stars.
4.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Bottom Line

PennyMac specializes in government mortgages like VA and FHA loans. PennyMac offers rate transparency, online only help, flexible loan terms, and a rate guaranteed to beat competitors. PennyMac is a great place for people to start looking for a mortgage.

Min. Credit Score 500 FHA 620 other mortgage products

  • 500-620

Min. Down Payment

  • 3%

Key Features

  • 100% online application
  • Instant rate estimates
  • Flexible terms
  • No lender fee

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA
  • Jumbo

Fixed Rate Terms

  • 30y, 20y, 15y (some customized terms are available)

Adjustable Rate Terms

  • 10/6, 7/6, 5/6

What type of mortgage can I get with bad credit?

While some lenders issue conventional loans to home buyers with bad credit, more likely than not, home buyers will need to secure financing from a governmental agency, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA). Loans backed by these government agencies often have more flexible underwriting standards and will allow lower credit scores than conventional mortgages

Let's take a look at each of these mortgages and see which might be right for you.

Best mortgages for bad credit FHA loan VA loan USDA loan
Minimum credit score requirement 580 (or 500 with a 10% down payment) None None
Down payment 3.5% None None
Maximum debt-to-income ratio 43% None (though the ideal DTI is 41%) 41%
Data source: FHA, VA, USDA

FHA loans

FHA loans are issued by private lenders but backed by the Federal Housing Administration. You can qualify for one with a credit score of 580 and a down payment of 3.5% or with a score as low as 500 and a minimum 10% down payment (some lenders require a higher minimum credit score). There are no minimum income requirements, although lenders must determine if the home buyer has sufficient income to repay the loan.

Compare lenders: Best FHA Lenders

Compare rates: Today's FHA Mortgage Rates

VA loans

VA loans are also issued by private lenders, but this time the Department of Veterans Affairs guarantees the loan rather than the FHA. There is no minimum credit score requirement imposed by the VA, but each lender has a cutoff. There's also no down payment required unless the home appraises for less than you're paying for it.

To be eligible, you'll need a Certificate of Eligibility (COE), which you'll get by meeting one of the following military service requirements: 

  • You're currently a service member and have completed 90 consecutive days of active duty service.
  • You're a veteran and have served 90 consecutive days during wartime or 181 consecutive days during peacetime. 
  • You're a National Guard or Reserve Member and have served 90 days of active service or six years of honorable service.
  • You're a surviving spouse of a service member who died in active service or from service-related injuries. 

Compare lenders: Best VA Loan Lenders

Compare rates: Today's VA Loan Rates

USDA loans

The U.S. Department of Agriculture also offers mortgages for home buyers with poor credit. 

Section 502 Direct Loans are made by the USDA directly and are open only to borrowers with limited incomes who are buying properties in rural areas. The USDA also guarantees loans to borrowers with low incomes, although the income limits are higher for these loans made by private lenders. 

No down payment is required for USDA loans, interest rates are often below what you'd be charged on a conventional loan, and you might qualify even with poor credit. While the USDA itself doesn't set a minimum credit score, USDA lenders may have their own requirements.

Compare lenders: Best USDA Mortgage Lenders

Mortgage Calculator: How Much House Can I Afford?
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How to get a mortgage with bad credit

Prospective home buyers with bad credit should take the following steps to pursue a mortgage:

  1. Improve your credit score. This could include reducing debt, correcting errors on your credit record, and asking creditors to remove black marks from your credit history. From now until the end of 2023, you're allowed one free weekly credit report from each of the three major crediting bureaus (usually each will send you one free report per year). You can order all three reports at once by visiting a site like AnnualCreditReport.com.
  2. Research home loan options for bad credit borrowers. Many lenders cater to borrowers with low credit scores. Government-backed loans including FHA, VA, and USDA loans are also available even with low credit scores. Look into each option.
  3. Save up for a down payment. Mortgage lenders view borrowers with larger down payments as a lower risk. This is primarily because they know you're putting "more skin in the game," and have more to lose if the home goes into foreclosure.
  4. Shop around and compare loan options. Get quotes from multiple lenders to get the most affordable home loan rate. It's even more important to shop around for mortgage rates when your credit score is low, as some lenders offer better rates for bad credit borrowers than others. Do not assume that all lenders offer a similar rate.

Can first-time home buyers with bad credit purchase a home?

Buying a home for the first time can be a daunting process, especially when dealing with poor credit. However, contrary to popular belief, having bad credit does not automatically disqualify a first-time home buyer from purchasing a home. In fact, many programs can help first-time home buyers with less-than-perfect credit find their dream home. There are even some options for how to buy a house with no credit.

While there are conventional loans for borrowers with imperfect credit, many would do better with government-backed loans. Government agencies guarantee loans in part to help people become first-time homeowners. These include FHA loans, VA loans, and USDA loans.

Each of these government-guaranteed loans comes with relaxed requirements for the credit score needed for a mortgage. FHA loans require a credit score of only 500 with a 10% down payment, and other loans have no credit score requirement at all (though individual lenders may impose their own requirements).

Should I get a mortgage with bad or poor credit?

While you can get a mortgage with bad credit, your mortgage will be less expensive and you'll have a broader choice of lenders if you raise your score. Depending on your financial situation, it may be worth waiting to improve your credit score before applying for a mortgage. There are seven simple steps you can take to help you rebuild credit.

  1. Pay all your bills on time. Payment history is the most important component of your score. Almost any creditor, including landlords and storage unit owners, can report you if you're late on payments.
  2. Make sure your positive payment records are included in your credit history. If you've paid your rent, utilities, or other bills on time, try to get them included. Services such as Experian Boost can help you get some of these accounts reported for free that otherwise wouldn't be.
  3. Keep your credit utilization ratio low. Maxed-out cards can be very damaging to your credit score. Try to keep your credit utilization ratio below 30% of your credit line to avoid hurting your score.
  4. Avoid closing old credit card accounts. The length of your credit history is an important factor in determining your credit score. The older your accounts, the higher your score.
  5. Aim to have a mix of different kinds of credit. Lenders like to see you've managed different kinds of debt, including credit cards and other revolving debt, as well as car and personal loans.
  6. Try to get old black marks removed from your credit history. Sometimes creditors are willing to remove a late payment from your credit report if you've mostly been a good customer. You can write a goodwill letter or call your creditor to ask.
  7. Be smart about rate shopping. While it's a smart idea to shop for a mortgage or other home loan, you want to avoid getting too many hard inquiries on your credit report. Look for poor credit mortgage lenders that pre-approve you and provide details of loan terms with a soft credit check only.

Research: The Largest Mortgage Lenders

Lender Best For Next Steps
Graphic of Axos Bank Mortgage
Rating image, 5.0 out of 5 stars.
5.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
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Rating image, 5.0 out of 5 stars.
5.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
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Best For

Best for low fees

Graphic of Ally Mortgage
Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Best For

Best for online experience

Award Icon 2024 Award Winner
Graphic of Carrington Mortgage Services
Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Rating image, 4.0 out of 5 stars.
4.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Best For

Best for custom mortgages

Graphic of Guild Mortgage
Rating image, 3.5 out of 5 stars.
3.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Rating image, 3.5 out of 5 stars.
3.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Best For

Best for rate lock

Graphic of PennyMac Mortgage
Rating image, 4.5 out of 5 stars.
4.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Rating image, 4.5 out of 5 stars.
4.5/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
Best For

Best for lender credits and guarantees

FAQs

  • Yes, it is possible to buy a home with a low credit score. Your best option may be to search for an FHA or USDA loan as these government-backed loans tend to be easier to qualify for and often offer the most affordable loans to bad credit borrowers.

  • In most cases, you will need to make at least a small down payment to buy a home, especially if you have bad credit. If your credit score is at least 580, you may be able to qualify for an FHA loan that enables you to make a down payment as low as 3.5%. The USDA and VA also both allow $0 down payment loan options for qualifying borrowers.

  • If you're buying a home with a low credit score, here are the key steps you should take:

    1. Determine why your credit score is low. To qualify for a conventional mortgage (a loan not backed by the government), your score usually needs to be 620 or higher. If your score is low because you don't have a credit history, lenders may be willing to engage in manual underwriting.
    2. Show consistent borrowing behavior. If you're working on paying down debt and you've paid all your recent bills on time, lenders may be open to providing a loan even with imperfect credit.
    3. Get your rent included on your credit report. Rental payments aren't generally included on your credit report. But services such as RentTrack, ClearNow, ERentPayment, and RentReporters can get your on-time rental history included, which can help increase your credit.
    4. Build up your cash savings. Having substantial assets can make you a more attractive borrower so lenders may be more willing to loan you money even with poor credit.
    5. Make a large down payment. The bigger your down payment, the less risk the lender takes on and the more easily you can qualify for a loan.
    6. Keep your debt-to-income ratio low. This is the ratio of debt relative to income. The maximum debt-to-income ratio for most mortgage lenders is 43%.
    7. Buy a less expensive home. A cheaper home enables you to borrow less, so lenders don't have to take on as much risk.
    8. Shop around. Compare online mortgage lenders, local banks, and credit unions to find the best bad credit mortgage loan options. Consider FHA, VA, or USDA loans as well as conventional loans, and get quotes from several lenders to find the best rates.
  • For most people, an FHA loan is the easiest mortgage to qualify for. FHA loans are guaranteed by the federal government, meaning the government promises to cover the mortgage if you default on the loan. That guarantee allows lenders to be a little more forgiving with requirements.

    If you can put 10% down, it's possible to land an FHA mortgage with a credit score as low as 500. With a 3.5% down payment, you'll need a score of at least 580.

  • The minimum credit score is always at the lender's discretion. While some programs, like the FHA loan, require minimum credit scores, others, like VA and USDA loans, let the lender decide.

    Even if your score is low, programs exist to help you get a mortgage. For example, the FHA program allows you to apply using alternative credit data (rent payments, cellphone payments, etc.) if you can find a lender who will work with you. And many lesser-known mortgage lenders specialize in making conventional loans to people who don't fit the traditional borrower mold, including people with a lower score or no score.

    To some extent, this is a situation where money talks. That's because besides your credit score, the lender will look at your financial stability, the size of your down payment, the amount of cash you have in reserve, and how much other debt you have. Generally speaking, if your application is weak in any one area, you can make up for it with a strong showing in the other areas. So if you have a low credit score or no credit score, you will need to bring money to the table and show a history of financial responsibility. The more money you bring, the less of an obstacle your score becomes and the lower risk you present.

  • Yes, mortgage interest rates are directly impacted by your credit score. The higher your score, the lower the interest rate you are likely to be offered. The lower your credit score, the higher the risk you are considered.

    If your credit score is not high enough to land a lower interest rate, consider taking time to boost it. While it won't happen overnight, a higher credit score can save you thousands of dollars over the life of a loan.

Our Mortgages Experts

Mortgage lenders we evaluated for consideration on this page include: United Wholesale Mortgage, Alliant Credit Union Mortgage, Redfin, Axos Bank Mortgage, Fairway Independent Mortgage, AmeriSave Mortgage Corporation, Flagstar Bank Mortgage, Guild Mortgage, PNC Mortgage, SoFi Mortgage, Realtor.com, Homesnap, Trulia, Zillow, LoopNet, Veterans United, Veterans United, Alterra Home Loans, Guaranteed Rate Mortgage, NASB Mortgage, Mr. Cooper Mortgage, Chase Mortgage, Citi Mortgage, The Loan Store, Rocket Mortgage®, Bank of America Mortgage, Churchill Mortgage, USAA Bank Mortgage, U.S. Bank Mortgage.