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If you are one of the millions of Americans with poor credit, qualifying for a mortgage can be difficult. Conventional mortgages typically require a score of 620 or higher.
However, there are some lenders that offer loan options for borrowers with less-than-perfect credit. We researched top companies and identified the best mortgage lenders for bad credit based on their credit score requirements, minimum down payment amounts, and debt-to-income ratio limits, among other factors. Read on to find a mortgage lender to suit your needs.
Best Mortgage Lenders for Bad Credit of 2022
Best Overall : Prosperity Home Mortgage
Offers multiple options with low down payment requirements
$1,500 credit for closing costs or down payments
In-person assistance available
Not available in New York or Hawaii
Doesn’t list its rates or fees online
Doesn’t disclose its credit requirements
Prosperity Home Mortgage is our choice as the best overall lender for borrowers with poor or fair credit because of its range of mortgage products and homebuyer assistance programs.
Although the company doesn’t list its credit score requirements online, a company representative told us its minimum score is about 600—a lower minimum than some other lenders require. It also allows borrowers to have a debt-to-income ratio as high as 50%, which is higher than many other lenders allow.
Borrowers who struggle to qualify for mortgages from other lenders may also benefit from the lender’s BorrowSmart program. Eligible borrowers can receive up to $1,500 as a credit toward closing costs or the mortgage’s down payment, allowing you to buy a home with less than 3% down.
Prosperity also participates in FannieMae’s HomeReady program, a mortgage option that helps borrowers in designated low-income, minority, and disaster-impacted communities become homeowners. The HomeReady program allows borrowers to put just 3% down.
Prosperity offers a variety of mortgage products, including:
- Conventional loans with fixed or adjustable rates
- FannieMae HomeReady
Prosperity is a full-service mortgage banker that operates 700 branches in the U.S, and it issues loans in 48 states. Borrowers can apply for a mortgage online or in person by visiting a local branch.
Best for VA Loans : Cherry Creek Mortgage
Low down payment options
Accepts credit scores as low as 580
Online calculators available
Not available in all states
Can’t apply online
Information about fees not listed
Cherry Creek Mortgage is a leading mortgage lender that offers VA loans to current active military, honorably-discharged veterans, Reservist members, eligible surviving spouses, and those who have veteran status through civilian employment.
With a Cherry Creek mortgage, you can qualify for a VA loan with no down payment or private mortgage insurance. And the VA funding fee can be rolled into your loan.
Cherry Creek has a range of other mortgage products, including those with down payment requirements as low as 3%. If you want to take advantage of an FHA loan, you could qualify with a credit score as low as 580.
Cherry Creek Mortgage was founded in 1987. Since its inception, the lender has originated over $78 billion in loans. Cherry Creek issues loans in 41 states, but borrowers cannot apply online; you have to work with a loan officer to get details about rates and fees and submit a loan application.
Best for Online Option : Better.com
Simple online process
No origination fees
Does not offer VA or USDA loans
All loans require down payments
Not available in Nevada
Better Mortgage is our choice as one of the best online mortgage lenders because of its simple and quick digital platform. Borrowers can get a rate estimate within seconds and, if they decide to apply for a loan, can complete every step of the application process online. Plus, Better doesn’t charge origination fees or commissions.
Although Better Mortgage has a minimum credit score requirement of 620 for conventional loans, it also offers FHA loans. FHA loans can be appealing for borrowers with poor credit since you can qualify with a score as low as 500 with a 10% down payment.
Better has a strong reputation for customer service; it was ranked 7th out of 23 lenders in the J.D. Power U.S. Primary Mortgage Origination Satisfaction Study, with a score above the industry average.
Unfortunately, Better Mortgage doesn’t offer other government-backed loans like VA or USDA loans. These are popular loans for eligible borrowers since they have a 0% down payment requirement, but borrowers will have to work with another lender to utilize them.
Better Mortgage was launched in 2014. It issues loans to borrowers in all states, with the exception of Nevada.
Best for Quick Closing Time : SWBC
Quick time to close
Offers renovation mortgages
Multiple government-backed loan options
Not available in all states
Doesn’t list its fees online
Must submit your information to view rates
Of the lenders on this list, SWBC had the quickest average closing time. According to the lender, most loans close in under three weeks, so you can move into your dream home sooner.
SWBC offers multiple loan products, including government-backed options like FHA loans, VA loans, and USDA loans. In addition, SWBC offers jumbo loans, conventional loans, and renovation mortgages.
SWBC also participates in the Veterans Housing Assistance Program (VHAP) for military veterans buying a home in Texas. Eligible borrowers can qualify for a loan with little to no down payment, and borrowers may qualify for interest rate discounts.
Although SWBC doesn’t list its minimum credit score requirement online, a customer service representative told us it requires a score of 600 or higher. To view fees and current rates, you must submit your personal information.
SWBC doesn’t issue loans to all borrowers; it’s only available in 42 states.
A low credit score doesn’t mean you can’t become a homeowner. There are several companies, such as Prosperity and Cherry Creek, that issue mortgages to borrowers with poor credit. And the best mortgage lenders for bad credit often have more flexible debt-to-income requirements and may ask for lower down payments, making it easier to qualify for a loan.
However, mortgages for bad credit usually have higher interest rates than other home loan options. If you have good credit—or a cosigner—you may find better rates from other leading mortgage lenders.
Compare the Best Mortgage Lenders for Bad Credit
|Company||Min. Credit Score (Conventional)||Max. Debt-to-Income Ratio||Min. Down Payment||Days to Closing|
|Prosperity Home Mortgage
|Cherry Creek Mortgage
Best for VA Loans
Best Online Option
Best for Quick Closing Time
Guide for Choosing a Mortgage Lender With Bad Credit
Should You Get A Mortgage If You Have Bad Credit?
If you have bad credit, whether it makes sense to take out a mortgage is dependent on several factors. Your credit plays a big role in your ability to get a loan. If your score is too low, you may not be eligible, or you may have to accept a higher interest rate to get a mortgage.
Another thing to consider is the cause of your low credit score. If you have a history of missed payments, your budget may be stretched too thin to afford a home, so it may make sense to hold off on buying a house right now.
Lenders will also look at your debt-to-income ratio to determine how much of a risk you are. If your debt-to-income ratio is high, it may be difficult to get approved for a mortgage.
The state of the real estate market can also impact your decision. In some cases, it may be cheaper over the long run to buy rather than rent. There are quite a few considerations to make to figure out whether buying or renting makes more sense in your area.
Improve Your Odds of Qualifying With Bad Credit
You can improve your chances of qualifying for a mortgage with these tips:
- Save a larger down payment: Although borrowers with excellent credit may qualify for a conventional mortgage with as little as 3% down, borrowers with poor credit may need a larger down payment. To give yourself the best chance of qualifying for a loan, aim to save 10% of the home value.
- Review your credit reports: Review your credit reports at AnnualCreditReport.com to see if there are any errors bringing your score down. If there are, dispute them with the credit bureaus.
- Pay down debt: You can improve your debt-to-income ratio—and your odds of getting a loan—by paying down your existing debt, such as your credit card balances.
- Apply with a cosigner or co-mortgagor: You may be able to qualify for a mortgage if you add a cosigner to your loan application. Requesting someone to be a cosigner is a huge ask, especially when it comes to a significant purchase like a house, so make sure you can comfortably afford the loan payments before going this route.
How to Compare Mortgage Lenders
When you’re looking for a lender, factors like APR and interest rate type are important. But if you have bad credit, you also want to think about the following to find the right lender for you:
- Minimum credit score requirements: Credit score requirements vary by lender. While some will work with borrowers with scores in the 500s, others require scores in the good to excellent range.
- Debt-to-income requirements: Typically, the maximum debt-to-income ratio lenders will accept is 43%. However, there are some mortgage companies that have higher DTI limits.
- Down payment requirements: If you have bad credit, you may be required to save a larger down payment than a borrower with excellent credit.
- Home buyer assistance programs: Many mortgage lenders have their own home buyer assistance programs. Benefits may include lower credit score requirements, lower down payment percentages, or credits toward closing costs.
How to Apply for a Mortgage
In general, you can start the process through a mortgage lender’s website. Or if you want help navigating through the application, you can contact an agent by phone or in person at a local branch.
When you shop for a mortgage, you can often pre-qualify to get an estimate of how much home you can afford. With a mortgage pre-qualification, the lender mostly relies on self-reported information.
With a pre-approval, the lender verifies your information and performs a hard credit inquiry, so it’s more accurate than a pre-qualification.
To apply for a mortgage, you’ll need to provide information and documentation about your finances, including:
- Recent pay stubs
- Recent tax returns
- Bank statements
- Investment account statements
- If you received a gift from a friend or relative for the down payment, a letter explaining the source of funds
Frequently Asked Questions
What Is a Mortgage for Bad Credit?
In general, lenders require a minimum credit score of at least 620 for most mortgages.
Borrowers with a score below that number may struggle to qualify for conventional mortgages. However, they may qualify for other mortgage products with lower credit requirements.
For example, a popular mortgage for bad credit is an FHA loan. Borrowers can qualify for an FHA loan with a score as low as 500.
What Is a Good Down Payment for a Mortgage for Bad Credit?
While borrowers with good credit can qualify for conventional mortgages with as little as 3% down, those with poor credit may need a larger down payment.
For example, FHA loans base the minimum down payment on the borrower’s credit score. A borrower with a score of 580 and above can buy a home with just 3.5% down. But a borrower with a score between 500 and 579 must have a down payment of at least 10%.
How Big of a Mortgage Can I Afford?
If you're like most Americans, buying a home is the biggest purchase you'll ever make. One of the first things you'll need to consider is how much house you can actually afford. This can be tricky to calculate, as there are many factors to consider including your household income, existing debt, and your down payment.
Lenders will typically approve or deny an applicant based on their debt-to-income (DTI) ratio. This ratio is calculated by dividing your monthly debts by your monthly income before taxes.
Mortgage lenders look at both your front-end and back-end DTI. The front-end DTI calculates how much of your gross income goes toward housing, while the back-end DTI calculates how much of your gross income goes toward other debt, such as your credit cards or student loans.
In general, mortgage lenders look for a DTI under 43%. However, there are some lenders that have higher DTI requirements.
How We Chose the Best Mortgage Lenders for Bad Credit
Our team evaluated 45 mortgage lenders and collected nearly 1,500 data points before selecting our top choices. We weighed 15 criteria and gave a higher weight to those with a more significant impact on potential borrowers.
The top picks were selected based on factors like quality of service (weighted 50%), operational features (32%), loan types (12%), and accessibility (6%). We took into account important considerations like whether or not the lender offers jumbo loans, how many states the lender is licensed in, and what the overall customer experience is like.
We also conducted a survey of 1,195 people who have taken out mortgages. We asked about customer satisfaction with various mortgage lenders, and we learned which features are most important from a customer perspective. This information helped determine weights for criteria used for scoring.
Read more in our full mortgage lender methodology.