11 Best Mortgage Lenders of 2023 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. 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.
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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- 50+ mortgage lenders reviewed and rated by our team of experts.
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Why trust NerdWallet
- 50+ mortgage lenders reviewed and rated by our team of experts.
- 40+ years of combined experience covering mortgages and financial topics.
- Objective, comprehensive star rating system assessing 120+ categories and 5,000+ data points.
- Governed by NerdWallet's strict guidelines for editorial integrity.
11 Best Mortgage Lenders of 2023 for Low or Bad Credit Score Borrowers
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Lender | NerdWallet Rating | Min. credit score | Min. down payment | Learn more |
|---|---|---|---|---|
 New American Funding: NMLS#6606 Top 3 most visited 🏆 See Offers at New American Funding | 500 | 3.5% | Top 3 most visited 🏆 See Offers at New American Funding | |
 Fairway Independent Mortgage: NMLS#2289 See Offers at Fairway Independent Mortgage | 580 | 3.5% | See Offers at Fairway Independent Mortgage | |
 Flagstar: NMLS#417490 Compare More Lenders on NerdWallet | 580 | 3.5% | Compare More Lenders on NerdWallet | |
 loanDepot: NMLS#174457 Compare More Lenders on NerdWallet | 520 | 3.5% | Compare More Lenders on NerdWallet | |
 Carrington: NMLS#2600 Compare More Lenders on NerdWallet | 500 | 0% | Compare More Lenders on NerdWallet |
- Why we like itNew American Funding offers a large menu of loan products, including FHA 203(k) loans, as well as programs like first-time home buyer assistance.Pros
- Offers a wide variety of purchase and refinance mortgages.
- Has unique buyer assistance programs.
ConsRead full review- Average origination fees are on the high side, according to the latest federal data.
- Personalized mortgage rates are not available on the website without providing contact information.
- Why we like itGood for: borrowers who want access to a wide variety of mortgages, including renovation loans and ITIN loans.Pros
- Offers a robust suite of loan products, including ITIN loans for borrowers without Social Security numbers, renovation loans, government-backed mortgages and loans for self-employed borrowers.
- Receives high marks for customer satisfaction, according to J.D. Power and Zillow.
ConsRead full review- Mortgage rates for different types of loans aren't posted online.
- Origination fees are on the high side compared with other lenders, according to the latest federal data.
- Why we like itFlagstar Bank, recently acquired by Mr. Cooper, stands out for its range of accessible loans and programs, including no-down-payment loans, localized loans with flexible requirements and a number of down payment grant options.Pros
- Reported average time to close (20-30 days) is faster than industry standard.
- Offers down payment assistance to first-time home buyers.
ConsRead full review- The lender’s mobile app is focused on banking, not mortgages.
- Some loans and programs are restricted by area.
- Why we like itWorking with LoanDepot partners offers the potential for a streamlined mortgage process and cash back, and the lender offers a wide variety of FHA loan types.Pros
- Offers a variety of repayment terms for fixed-rate loans.
- Does a substantial amount of business in FHA lending.
- mello smartloan product can streamline mortgage application, appraisal and title search.
ConsRead full review- Interest rates are not available on the website.
- Can't apply for a mortgage on the lender's mobile app.
- Why we like itGood 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.
ConsRead full review- Doesn't offer home equity lines of credit.
- Lender fees are on the high side, according to the latest federal data.
- Why we like itCrossCountry Mortgage has a solid variety of FHA loans, as well as impressive down payment assistance programs for first-time buyers.Pros
- Average time to close is 21 days, which is faster than the industry standard.
- Qualified borrowers can receive up to $6,500 in down payment assistance.
- High market share of FHA loans.
ConsRead full review- Doesn’t post rates online.
- No mobile app.
- Why we like itGood 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.
ConsRead full review- 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.
- Why we like itGood 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.
ConsRead full review- 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.
- Why we like itGood 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.
ConsRead full review- Doesn't post interest rates on its site.
- Lender fees are on the high side, according to the latest federal data.
- Why we like itGood for: borrowers who want a variety of loan products paired with a smooth digital process.Pros
- Convenient online application and loan process updates.
- Offers a variety of mortgage options, including FHA, VA and USDA loans.
ConsRead full review- Mortgage interest rates aren't published online.
- Doesn’t offer home equity loans or lines of credit.
- Lender fees are on the high side, according to the latest federal data.
- Why we like itGood 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.
ConsRead full review- Watermark’s mortgage interest rates are not published online.
- Watermark says it offers HELOCs, but no details are available online.
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.
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 August 1, 2023
Frequently asked questions
There are multiple reasons to refinance your mortgage. Saving money is a big one: Getting a lower rate brings down your monthly payments, while shortening the term means you'll pay less total interest. A mortgage refinance calculator can help you see how much you'll save and when you'll break even.
Not necessarily. Even though it might be easy to refinance with your current mortgage lender, it may not offer the best deal. Shop at least three mortgage refinance lenders and compare the interest rate and terms each lender offers.
Refinance rates are in constant flux and vary based on economic trends, like job growth and inflation. But the rate you're offered will also depend on your individual financial situation, and factors like your credit score and the loan-to-value ratio of your refinance. Get quotes from multiple lenders to find the best refinance rates.
In order to qualify for a mortgage refinance, you will need to meet the criteria set by your lender and loan program. These can include income requirements, a minimum credit score, a maximum debt-to-income ratio and sufficient home equity.
Methodology
The star ratings on this page reflect each lender's performance in NerdWallet’s refinance category. We scored the category and chose lenders for this page using the following 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.
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
- Fairway Independent Mortgage: Best for self-employed borrowers
- Flagstar: Best for digital convenience
- loanDepot: Best for renovation loans
- Carrington: Best for low or bad credit scores overall
- CrossCountry Mortgage: Best for variety of loan types
- Alterra: Best for nontraditional credit
- Citibank: Best for low down payment
- Homebridge: Best for customer support
- Sebonic Financial: Best for ease of application
- Watermark Home Loans: Best for FHA loans
