Home loans for less than perfect credit

Q: What is the lowest credit score to finance a house?

Generally speaking, youll need a credit score of at least 620 in order to secure a loan to buy a house. Thats the minimum credit score requirement most lenders have for a conventional loan. With that said, its still possible to get a loan with a lower credit score, including a score in the 500s.

Table of Contents Show

The Ascent's best mortgage lenders for bad credit:
What type of mortgage can I get with bad credit?
How to get a mortgage with bad credit
Can first-time home buyers with bad credit purchase a home?
Should I get a mortgage with bad or poor credit?
What is considered less than perfect credit?
What is the lowest credit score to finance a house?
What is the easiest house loan to get?
What lenders are the easiest to get approved for?

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Many lenders have strict qualifying requirements for mortgage loans, which can make it challenging for borrowers with bad credit to obtain a mortgage. However, if you're a would-be homebuyer looking for the best mortgage lenders for bad credit, there are options out there. A lot of home loans for bad credit are backed by government agencies including the Federal Housing Administration (FHA), the Veteran's Administration (VA), or the U.S. Department of Agriculture (USDA).

Read on to see our shortlist of picks for mortgage companies for bad credit and learn more about getting a mortgage with a low credit score.

The Ascent's best mortgage lenders for bad credit:

Best for: Online experience

Ally Mortgage

Bottom Line

Ally is limited in loan options compared to competitors, but it's all about efficiency and a speedy online experience.

Min. Credit Score Minium Credit Score 620 Conventional 700 Jumbo

580 - 700

Min. Down Payment

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

Best for: Diverse loan terms

Navy Federal Credit Union Mortgage

Bottom Line

The rate match guarantee ensures homeowners can secure a great deal and the ability to finance up to 100% of purchase price is a rare offering. The lender scores some of the best customer satisfaction ratings among top picks.

Min. Credit Score Minium Credit Score 580 FHA

Min. Down Payment

Key Features

High customer satisfaction
Up to 100% financing
Mortgage with no PMI
Rate match guarantee

Loan Types

Conventional
VA
Jumbo
Interest Only

Fixed Rate Terms

10 - 30 years

Adjustable Rate Terms

5/5, 3/5

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.

Min. Credit Score Minium Credit Score 580 FHA 620 other mortgage products

500 - 620

Min. Down Payment

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: Program variation

AmeriSave Mortgage Corporation

Bottom Line

AmeriSave operates in 49 states, allows you to chat online with a mortgage professional, and charges no origination fees.

Min. Credit Score Minium Credit Score 580 FHA 620 other mortgage products

600 - 640

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

0% - 3.5%

Key Features

Streamlined online process
Quick prequalification and detailed rate quotes
Rate match guarantee

Loan Types

Conventional
FHA
VA
USDA
Jumbo

Fixed Rate Terms

30y, 25y, 20y, 15y, 10y

Adjustable Rate Terms

10/1, 7/1, 5/1

Best for: Flexible options

Bank of America Mortgage

Bottom Line

Few lenders can match the lineup of loan products and terms, and the interest rate and fee discounts for Preferred Rewards members define what relationship banking should look like.

Min. Credit Score Minium Credit Score 620 FHA 600 Other mortgage products 640 Affordable Loan Solution® 680 Jumbo Loans

Min. Down Payment Minium Down Payment 0% VA loans 3.5% FHA 3% Conventional loans, Affordable Loan Solution® mortgage, Freddie Mac Home Possible® mortgage 5% Other loans

0% - 5%

Key Features

Relationship interest rate and fee discounts
Ability to apply entirely online
No PMI offering
Loans up to $5 million

Loan Types

Conventional
FHA
VA
Jumbo

Fixed Rate Terms

30y, 20y, 15y

Adjustable Rate Terms

10/6, 7/6, 5/6

Best for: Custom mortgages

Carrington Mortgage Services

Bottom Line

Carrington has a wide selection of mortgage products and terms, and can find solutions for borrowers with bad credit or nontraditional income.

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

500 - 620

Min. Down Payment Minium 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: Rate lock

Guild Mortgage

Bottom Line

With programs for first-time homebuyers and down payment assistance, Guild is worth checking out for most people, especially first-time buyers.

Min. Credit Score

540 (FHA)
620 (Conventional)

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

0% - 3.5%

Key Features

Great for first-time buyers
Fast closing
Renovation loans

Loan Types

Conventional
FHA
VA
USDA
Jumbo
Reverse

Fixed Rate Terms

10 - 30 years

Adjustable Rate Terms

10/1, 7/1, 5/1, 3/1

Best for: Past bankruptcy

NASB Mortgage

Bottom Line

The self-employed borrower program may be a great option for people who otherwise have a hard time getting a competitive loan, plus the lender still offers a good range of mortgage programs for other needs.

Min. Credit Score Minium Credit Score 580 FHA Loans 620 for Conventional 660 for VA Loans

580 - 660

Min. Down Payment

0% - 5%

Key Features

The lender offers a variety of mortgage products
Self-employed loan programs
VA loans come with no lender fees

Loan Types

Conventional
FHA
VA
Jumbo

Fixed Rate Terms

30y, 15y

Adjustable Rate Terms

Best for: Lender credits and guarantees

PennyMac Mortgage

Bottom Line

By offering 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 Minium Credit Score 500 FHA 620 other mortgage products

500 - 620

Min. Down Payment

Key Features

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

Loan Types

Conventional
FHA
VA
USDA
Jumbo

Fixed Rate Terms

3y, 20y, 15y (some customized terms are available)

Adjustable Rate Terms

10/1, 7/1, 5/1, 3/1

What type of mortgage can I get with bad credit?

While some lenders make conventional loans to home buyers with bad credit, you will often secure more affordable financing if you get a poor credit mortgage insured by a government agency. These mortgages not only have relaxed credit requirements but also require lower down payments than most conventional mortgages do.

There are three primary options for government-backed loans that could be available to borrowers looking for bad credit mortgage loans.

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 10% down payment. There are no minimum income requirements, although lenders must determine if the would-be homeowner 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. There's also no down payment required unless the home appraises for less than you're paying for it. You do need to be a service member or have a record of military service, although surviving spouses of servicemen and women are also eligible.

Compare lenders: Best VA Loan Lenders

Compare rates: Today's VA Loan Rates

USDA Loans

The U.S. Department of Agriculture offers two programs for would-be home buyers. 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 can qualify even with imperfect credit.

Compare lenders: Best USDA Mortgage Lenders

Mortgage Calculator: How Much House Can I Afford?

Home I Can Afford

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How to get a mortgage with bad credit

Aim to get your score in the best shape possible. Reducing debt, correcting errors on your credit record, and asking creditors to remove black marks from your credit history could help you qualify for a better rate.
Research 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.
Save up a down payment. A larger down payment reduces the risk of lending to you. You're borrowing less and have more of a stake in the house.
Shop around and compare loan options. Get quotes from multiple lenders to get the most affordable 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.
Consider a cosigner. If someone with better credit will cosign, you may be able to qualify for a better rate.

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

First-time home buyers with bad credit may be able to purchase a home. Some lenders offer special first-time buyer programs that have relaxed credit score requirements to qualify. 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-be homeowners 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.

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. There are seven simple steps you can take to help you rebuild credit.

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.
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.
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.
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.
Aim to have a mix of different kinds of credit. Lenders like to see you've used different kinds of debt, including credit cards and other revolving debt, as well as car loans and other installment loans.
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.
Be smart about rate shopping. While it's a smart idea to shop for a mortgage or other loan, you want to avoid getting too many hard inquiries on your credit report. Look for lenders that pre-approve you and provide details of loan terms with a soft credit check only.

Need a credit card? Check out The Ascent's Total Visa® Review and save this one as your last resort.

FAQs

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: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. But you will probably have to work a little harder to find a lender. Even for an FHA loan with a higher down payment, most lenders require a score of at least 540. 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. There is technically no minimum that applies across the board. Most lenders require a score of at least 580, and some lenders' minimums are even higher. But if your score is lower, you can still find a mortgage.
Programs exist for people with lower scores or even no credit score at all. For example, the FHA program allows you to apply using alternative credit data (rent payments, cell phone 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.
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.
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.

What is considered less than perfect credit?

Poor Credit Scores From VantageScore The company says a credit score is poor if it's between 500 and 600, while a score from 300 to 499 is called very poor. “In general, people with higher scores can get more credit at better rates,” VantageScore says.

What is the lowest credit score to finance a house?

Generally speaking, you'll need a credit score of at least 620 in order to secure a loan to buy a house. That's the minimum credit score requirement most lenders have for a conventional loan. With that said, it's still possible to get a loan with a lower credit score, including a score in the 500s.

What is the easiest house loan to get?

A Federal Housing Administration loan, or FHA loan, typically allows you to purchase a home with looser requirements — for example, you may get approved with a lower credit score or be able to get away with having a higher debt-to-income ratio. You'll typically only need to make a 3.5% down payment as well.

What lenders are the easiest to get approved for?

The easiest loans to get approved for would probably be payday loans, car title loans, pawnshop loans, and personal installment loans. These are all short-term cash solutions for bad credit borrowers in need. Many of these options are designed to help borrowers who need fast cash in times of need.