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.
Home loans for those with bad credit
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.
Some lenders in the list below have not provided minimum credit scores to NerdWallet, but still offer loan programs that may fit the needs of borrowers with lower credit. The star ratings shown are specific to the product with the lowest specified credit score minimum (for example, FHA or VA loans).
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Best Mortgage Lenders of 2023 for Low or Bad Credit Score Borrowers
| Lender | NerdWallet rating | Min. credit score | Min. down payment | Learn more |
|---|---|---|---|---|
| New American Funding: NMLS#6606 | 4.0/5Best for low or bad credit scores overall | 500 | 3.5% | LEARN MOREat New American Funding |
| Northpointe: NMLS#447490 | 3.5/5Best for first-time home buyers | 620 | 3.5% | LEARN MOREat Northpointe |
| Fairway Independent Mortgage: NMLS#2289 | 3.5/5Best for self-employed borrowers | 580 | 3.5% | LEARN MOREat Fairway Independent Mortgage |
| Citibank: NMLS#412915 | 3.5/5Best for low down payment | N/A | 3.5% | READ REVIEW |
| Alterra: NMLS#133739 | 3.5/5Best for nontraditional credit | N/A | 3.5% | READ REVIEW |
| Homebridge: NMLS#6521 | 3.5/5Best for customer support | N/A | 3.5% | READ REVIEW |
| Watermark Home Loans: NMLS#1838 | 3.0/5Best for FHA loans | N/A | 3.5% | READ REVIEW |
| Caliber: NMLS#15622 | 3.5/5Best for VA loans | 580 | 3.5% | READ REVIEW |
| Carrington: NMLS#2600 | 3.5/5Best for low or bad credit scores overall | 500 | 0% | READ REVIEW |
| CrossCountry Mortgage: NMLS#3029 | 3.5/5Best for variety of loan types | 500 | 3.5% | READ REVIEW |
| Flagstar: NMLS#417490 | 3.5/5Best for digital convenience | 580 | 3.5% | READ REVIEW |
| loanDepot: NMLS#174457 | 3.5/5Best for renovation loans | 520 | 3.5% | READ REVIEW |
| Sebonic Financial: NMLS#66247 | 3.0/5Best for ease of application | 550 | 0% | READ REVIEW |
LOW CREDITBEST OVERALLFIRST TIME BUYERSHELOCFOR VETERANSFHAREFINANCEONLINE LENDERSMORE
at New American Funding
New American Funding: NMLS#6606
Min. credit score500
Min. down payment0%
View details
at Northpointe
Northpointe: NMLS#447490
Min. credit score620
Min. down payment3.5%
View details
at Fairway Independent Mortgage
Fairway Independent Mortgage: NMLS#2289
Min. credit score580
Min. down payment3.5%
View details
Watermark Home Loans: NMLS#1838
Min. credit scoreN/A
Min. down payment3.5%
View details
Citibank: NMLS#412915
National / regionalNational
Min. down payment3.5%
View details
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:
- 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 an interest rate you’ll be offered and how large 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 (including your housing costs). 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.
» MORE: See how much you could borrow to buy a home
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.
» 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 January 13, 2023
Methodology
The star ratings on this page reflect each lender’s rating for FHA products (read more about how we determine FHA ratings) or VA products (read more about how we determine VA ratings). The lenders on this page are chosen using this methodology:
NerdWallet reviewed more than 50 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 Home Mortgage Disclosure Act data for origination volume, origination fee, average interest rate and share-of-product data.
To recap our selections…
NerdWallet’s Best Mortgage Lenders of 2023 for Low or Bad Credit Score Borrowers
- New American Funding: Best for low or bad credit scores overall
- Northpointe: Best for first-time home buyers
- Fairway Independent Mortgage: Best for self-employed borrowers
- Citibank: Best for low down payment
- Alterra: Best for nontraditional credit
- Homebridge: Best for customer support
- Watermark Home Loans: Best for FHA loans
- Caliber: Best for VA loans
- Carrington: Best for low or bad credit scores overall
- CrossCountry Mortgage: Best for variety of loan types
- Flagstar: Best for digital convenience
- loanDepot: Best for renovation loans
- Sebonic Financial: Best for ease of application