10 Best Mortgage Lenders of 2021 for Low or Bad Credit Score Borrowers
A home loan with bad credit is possible, even if you’re a first-time home buyer. These low credit score mortgage lenders specialize in serving borrowers with credit challenges.
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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. A bad credit score generally falls below 630.
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.
If your credit score is at or near a lender's minimum, they 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.
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. A bad credit score generally falls below 630.
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.
If your credit score is at or near a lender's minimum, they 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.
Summary of Best Mortgage Lenders of 2021 for Low or Bad Credit Score Borrowers
| Lender | NerdWallet Rating | Min. Credit Score | Min. Down Payment | Learn More |
|---|---|---|---|---|
 Rocket Mortgage by Quicken Loans: NMLS#3030 Learn more at Rocket Mortgage by Quicken Loans | Best for online experience | 580 | 3.5% | Learn more at Rocket Mortgage by Quicken Loans |
 Quicken Loans: NMLS#3030 Learn more at Quicken Loans | Best for refinancing | 580 | 3.5% | Learn more at Quicken Loans |
 New American Funding: NMLS#6606 Learn more at New American Funding | Best for low or bad credit scores overall | 640 | 3.5% | Learn more at New American Funding |
 BNC National Bank: NMLS#418467 Learn more at BNC National Bank | Best for FHA loans | 640 | 3.5% | Learn more at BNC National Bank |
 Carrington: NMLS#2600 | Best for low or bad credit scores overall | 500 | 3.5% | Read review |
 Network Capital: NMLS#11712 Learn more at Network Capital | Best for customer support | 640 | 3.5% | Learn more at Network Capital |
 Homebridge: NMLS#6521 | Best for customer support | 550 | 3.5% | Read review |
 Mr. Cooper: NMLS#2119 | Best for refinancing | 620 | 3% | Read review |
 Citibank: NMLS#412915 | Best for low down payment | N/A | 3.5% | Read review |
 Navy Federal: NMLS#399807 | Best for low down payment | N/A | 0% | Read review |
at Rocket Mortgage by Quicken Loans
Rocket Mortgage by Quicken Loans: NMLS#3030
Min. Credit Score
Min. Down Payment
at Rocket Mortgage by Quicken Loans
at Quicken Loans
Quicken Loans: NMLS#3030
Min. Credit Score
Min. Down Payment
at Quicken Loans
at New American Funding
New American Funding: NMLS#6606
Min. Credit Score
Min. Down Payment
at New American Funding
at BNC National Bank
BNC National Bank: NMLS#418467
Min. Credit Score
Min. Down Payment
at BNC National Bank
Carrington: NMLS#2600
Min. Credit Score
Min. Down Payment
at Network Capital
Network Capital: NMLS#11712
Min. Credit Score
Min. Down Payment
at Network Capital
Homebridge: NMLS#6521
Min. Credit Score
Min. Down Payment
Mr. Cooper: NMLS#2119
Min. Credit Score
Min. Down Payment
Citibank: NMLS#412915
National / Regional
Min. Down Payment
Navy Federal: NMLS#399807
National / Regional
Min. Down Payment
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 of an interest rate you'll be offered and how large of 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 would need to be able to make a 10% 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: 8 ways to build 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 pretax income.
Most lenders will look for a DTI that's 36% or lower. 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 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 help 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:
Last updated on March 29, 2021
Methodology
NerdWallet's star ratings for mortgage lenders are awarded based on our evaluation of the products and services each lender offers to consumers who are actively shopping for the best mortgage. The five key areas we evaluated include the variety of loan types and products offered, online conveniences, online mortgage rate information, and the rate spread and origination fee lenders reported in the latest available Home Mortgage Disclosure Act data. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.
To recap our selections...
NerdWallet's Best Mortgage Lenders of 2021 for Low or Bad Credit Score Borrowers
- Rocket Mortgage by Quicken Loans: Best for online experience
- Quicken Loans: Best for refinancing
- New American Funding: Best for low or bad credit scores overall
- BNC National Bank: Best for FHA loans
- Carrington: Best for low or bad credit scores overall
- Network Capital: Best for customer support
- Homebridge: Best for customer support
- Mr. Cooper: Best for refinancing
- Citibank: Best for low down payment
- Navy Federal: Best for low down payment
Frequently asked questions
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.
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.
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.
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.
