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9 Best Mortgage Lenders of 2022 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.

Nov 1, 2022

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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. 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.

Lenders consider more than just credit score when evaluating a mortgage applicant. 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.

Best Mortgage Lenders of 2022 for Low or Bad Credit Score Borrowers

New American Funding
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at New American Funding

New American Funding: NMLS#6606

4.5

NerdWallet rating 
New American Funding

Min. credit score

500

Min. down payment

0%
Learn more

at New American Funding


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.

  • Its home equity line of credit can be used for an owner-occupied or second home.

  • Offers a program to enable buyers to make cash offers.

Cons

  • Mortgage origination fees tend to be on the high end, according to the latest federal data.

Read Full Review
Northpointe
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at Northpointe

Northpointe: NMLS#447490

4.0

NerdWallet rating 
Northpointe

Min. credit score

620

Min. down payment

3.5%
Learn more

at Northpointe


Why we like it

Good for: those seeking an abundance of loan offerings, including a no-down-payment mortgage that helps accelerate home equity accumulation.

Pros

  • A full slate of loan offerings.

  • Offers a no-down-payment loan with a shorter repayment term that helps accelerate home equity accumulation.

  • Digital conveniences include a mobile app.

Cons

  • 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 data.

Read Full Review

Citibank: NMLS#412915

4.0

NerdWallet rating 
Citibank

National / regional

National

Min. down payment

3.5%

Why we like it

Good for: Buyers who want to explore low down payment mortgages, including government-backed loans and Citi’s proprietary option.

Pros

  • Offers a wide variety of loan options, including low-down-payment mortgages and jumbo mortgages.

  • Offers low rates compared with other lenders, according to the latest data.

  • Receives high marks for customer satisfaction, according to J.D. Power and Zillow.

Cons

  • Requires help from a loan officer to complete an online mortgage application.

  • Customized mortgage rates not available without making contact.

  • Doesn’t offer renovation loans.

Read Full Review

Mr. Cooper: NMLS#2119

4.0

NerdWallet rating 
Mr. Cooper

Min. credit score

580

Min. down payment

3.5%

Why we like it

Good for: tech-savvy borrowers looking for lower credit score requirements and a mobile app that goes beyond the basics.

Pros

  • Has a robust digital experience and mobile app.

  • Offers a 45-day rate lock option.

Cons

  • Requires a call or email for personalized rates.

  • Does not offer home equity loans or lines of credit, or home improvement loans.

Read Full Review

Alterra: NMLS#133739

3.5

NerdWallet rating 
Alterra

Min. down payment

3.5%

National / regional

Regional

Why we like it

Good for: first-time home buyers and those ineligible for Social Security numbers.

Pros

  • Offers an ITIN qualification path for borrowers ineligible for Social Security numbers.

  • Has a digital application process.

  • Offers government-backed mortgage options for low- to moderate-income borrowers.

Cons

  • No mortgage rates published online.

  • No home equity loans or lines of credit.

  • Generally has higher rates and fees than other lenders.

  • Branch offices not available in all states.

Read Full Review

Homebridge: NMLS#6521

3.5

NerdWallet rating 
Homebridge

Min. credit score

550

Min. down payment

3.5%

Why we like it

Good for borrowers who want a loan officer's help, in person or on the phone, when deciding among the wide range of available mortgage options — including loans to buy and renovate.

Pros

  • Offers a full array of mortgage products, including government and renovation loans.

  • Online portal keeps borrowers up to date on the loan application's progress.

  • Offers home equity lines of credit, or HELOCs.

Cons

  • Doesn't post interest rates on its site.

  • Lender fees are on the high side, according to the latest federal data.

Read Full Review

Watermark Home Loans: NMLS#1838

4.0

NerdWallet rating 
Watermark Home Loans

Min. credit score

580

Min. down payment

3.5%

Why we like it

Good for: borrowers looking for a solid selection of loan types with some not-so-standard options, such non-QM loans.

Pros

  • Online capabilities include a full application, as well as loan process updates.

  • Offers low rates compared with other lenders, according to the latest federal data.

Cons

  • Watermark’s mortgage interest rates are not published online.

  • Watermark says it offers HELOCs, but no details are available online.

Read Full Review

Caliber: NMLS#15622

3.5

NerdWallet rating 
Caliber

Min. credit score

580

Min. down payment

3.5%

Why we like it

Good for: first-time home buyers, veterans and those who may have credit challenges to overcome.

Pros

  • Offers extensive educational resources for military borrowers.

  • Participates in some down payment assistance and first-time home buyer programs.

Cons

  • No mortgage rates displayed online.

  • Doesn’t offer home equity loans or lines of credit.

Read Full Review

Carrington: NMLS#2600

4.0

NerdWallet rating 
Carrington

Min. credit score

500

Min. down payment

3.5%

Why we like it

Good 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

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:

  1. Your credit score.

  2. The amount of debt you carry compared to the income you receive, also called your debt-to-income ratio or DTI.

  3. Your employment history.

  4. 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.

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 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.

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 November 1, 2022

Methodology

The star ratings on this page reflect each lender's rating for FHA products. Read more about how we determine those ratings. The lenders on this page are chosen using this methodology:

NerdWallet reviewed nearly 60 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 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. Lenders that offer a loan product or feature that accommodates borrowers with lower credit scores but do not provide NerdWallet with minimum credit scores for all products or loan types can be included.

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 2021 HMDA data for origination volume, origination fee, rate spread and share-of-product data.

To recap our selections...

NerdWallet's Best Mortgage Lenders of 2022 for Low or Bad Credit Score Borrowers

Frequently asked questions