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Best bad credit home loans in 2024

How to buy a house when your credit score is poor

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Quicken Loans and Rocket Mortgage
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Even if your credit score doesn’t fall into the fair to excellent range, you don’t have to give up your dreams of homeownership. While buying a home with excellent credit does make the process easier and helps you secure a lower interest rate, this doesn’t mean you are out of luck if you are ready to buy before your credit score can go up.

To find the best home loan for a subprime credit score, you’ll want to vet lenders by comparing the minimum credit score needed, down payment requirements and the types of loans it authorizes.

We’ve profiled five mortgage lenders that offer government-backed loans, which typically come with more flexible credit requirements.

Our picks may be Authorized Partners that compensate us. This does not affect our recommendations or evaluations but may impact the order in which companies appear.

Mr. CooperCiti MortgageWells Fargo MortgageBank of America MortgageRocket Mortgage
Primary Customer Rating
3.8
10,842 reviews10,842 reviews		Loan types
Conventional, FHA, VA and jumbo loans
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%
Primary Customer Rating
3.7
1,026 reviews1,026 reviews		Loan types
Conventional, FHA, VA, jumbo and Citi’s HomeRun Mortgage program
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%
Primary Customer Rating
3.5
1,578 reviews1,578 reviews		Loan types
Conventional, FHA, VA and jumbo
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%
Primary Customer Rating
2.2
2,911 reviews2,911 reviews		Loan types
Conventional, FHA, VA, jumbo and Affordable Loan Solution program
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%
Primary Customer Rating
3.9
1,570 reviews1,570 reviews		Loan types
Conventional, FHA, VA, jumbo, YOURgage and ONE+
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
0% to 3.5%
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Compare our top five bad credit home loans

Mr. Cooper

3.8
10,842 reviews
Loan types
Conventional, FHA, VA and jumbo loans
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%

Mr. Cooper is an online mortgage lender that serves clients nationwide and offers support for both home purchases and home refinancing. Mr. Cooper makes the loan process easier with a digital loan tracker and online preapproval tool. You can get a preapproval within minutes, which is good for up to 120 days. Its Close On Time Guarantee promises that if you miss your closing date, your first month’s mortgage payment (principal and interest) is covered.

While you can apply for VA and FHA loans, Mr. Cooper does not offer USDA loans. Mr. Cooper also offers an FHA Streamline Loan and VA Interest Rate Reduction Refinance Loan (IRRRL), which are refinancing options for FHA and VA loans. These refinance options can help you secure a better loan rate if your credit score improves significantly after you buy.

Many reviewers have been happy with Mr. Cooper, saying the application process was simple and not a lot of paperwork was required.

Ruben from Texas went through a bad bankruptcy that ruined his credit. They said Mr. Cooper was helpful in communicating and answering questions once the bankruptcy was discharged: “Their customer service is courteous and will help you even if you have bad credit or good credit. They also make all the accommodations to adjust to the customer.”

Citi Mortgage

3.7
1,026 reviews
Loan types
Conventional, FHA, VA, jumbo and Citi’s HomeRun Mortgage program
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%

Citi is a national bank and mortgage lender that offers special pricing for its new and existing banking customers; your discount depends on your eligible account balance. However, you will need to call for the current FHA and adjustable-rate mortgage rates since only a select few product rates are listed online.

One feature that sets Citi apart is its HomeRun Mortgage program, which is designed to help make buying a house easier and more affordable. Benefits of the program include:

  • Down payment as low as 3% (or 1% if the other 2% is gifted)
  • No mortgage insurance requirements
  • Competitive interest rates
  • More flexible credit requirements

Loans under this program are available for as much as $726,200 to $1,089,300, depending on where you live.

Some customers were impressed with Citi’s application process and felt it was easy to understand and submit. One reviewer from New York chose to use Citibank for their mortgage because they have a long-standing relationship.

She said: “The Mortgage Loan Officer was outstanding and very helpful from the beginning of the process even while I was looking for the right home. She was very patient and responded quickly to my question whether by phone or text and explained the different options so that I could make the right decision.”

Wells Fargo Mortgage

3.5
1,578 reviews
Loan types
Conventional, FHA, VA and jumbo
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%

Wells Fargo is a national financial institution that services home loans for customers all over the U.S. It can help finance both conventional and government-backed mortgages for borrowers with credit scores as low as 580. It does not offer USDA loans, but for the FHA loans it offers, you can use a co-applicant to qualify even if they don’t live in your home.

Along with flexible credit requirements, Wells Fargo allows a down payment as low as 3%. To qualify for a low down payment loan, you will need to pay mortgage insurance and possibly be required to take a homebuyer education course.

Cynthia from Ohio was a first-time buyer and was apprehensive about using Wells Fargo at first. However, her loan agents made the process go smoothly.

“I also enjoyed the fact I could use the Loan Tracker which was a great help as well. Even though there are so many steps in purchasing a home, you must speak to a few different people in their respective areas, Brandon was still there ensuring all was going well for me,” she said. “I realize WF didn't have the best reputation but I have absolutely nothing but praise for the service I've personally received.”

Bank of America Mortgage

2.2
2,911 reviews
Loan types
Conventional, FHA, VA, jumbo and Affordable Loan Solution program
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
3%

Bank of America offers conventional home loans alongside FHA and VA loans. It does not offer USDA loans. Many of its daily mortgage rates are posted online, but you will need to contact the company for current VA and FHA rates.

Those who choose to use Bank of America as their lender will be able to complete the whole process online with its Home Loan Navigator, but brick-and-mortar locations are also available.

Its Affordable Loan Solution program is an option for modest-income and first-time buyers. Homebuyers can qualify for a mortgage with as little as 3% down. Participants in the program may be required to take educational courses by Department of Housing and Urban Development-approved financial counselors. Mortgage insurance is required with this program, but it is at a reduced cost.

Some buyers liked the ease of Bank of America’s online application process and enjoyed having a mortgage with a bank that offers other products, too, such as a free checking account and safety deposit box. Due to the size of the bank, customers are able to shop for a wide variety of financing options, such as auto loans, alongside mortgage loans.

Rocket Mortgage

3.9
1,570 reviews
Loan types
Conventional, FHA, VA, jumbo, YOURgage and ONE+
Minimum credit score
580 for government-backed loans; 620 for conventional
Minimum down payment
0% to 3.5%

Quicken Loans changed its name to Rocket Mortgage in 2021 and still offers both conventional and government-backed loans. It stopped offering USDA loans in 2020, but it still offers FHA loans with a minimum of 3.5% down and VA loans with a minimum of 0% down.

Rocket Mortgage does require a 580 median credit score for both FHA and VA loans and also wants to see a strong proof of income and a debt-to-income (DTI) ratio below 50%.

Its YOURgage mortgage option, which requires a higher credit score of 620, allows buyers to choose a custom loan term between eight and 29 years.

Additionally, if your credit score is over 620 and you make 80% of your area’s median income or less, you can qualify for the ONE+ conventional loan product that requires only 1% down — Rocket Mortgage covers the other 2%.

Rocket Mortgage has been praised by many reviewers for having a fast process and great customer service. Camille from Tennessee was able to start the application and close their house in eight days.

She said: “I was hesitant at first because I have been so loyal to my previous Credit Union but they simply could not beat Rocket's rates. Everyone was prompt and courteous with timely feedback pertaining to documents needed. Would HIGHLY recommend giving Rocket Mortgage a look if you are planning on purchasing or refinancing.”

Lisa from Georgia confirmed that fast process by saying, “Throughout the whole process I probably spent less than 30 minutes on the phone which was incredible and such a positive for me.”

What is bad credit?

Since lenders cannot take someone’s word that they are financially responsible, a person’s credit score helps to determine creditworthiness. Your credit score is a three-digit number ranging from 300 to 850. The higher the number, the less risky you are for lenders to finance.

For FICO’s scoring model, any score below 670 is considered fair or poor credit: A score between 580 and 669 is fair, and a score between 300 and 579 is poor. If you have a credit score in the poor range, you might not meet your lender’s minimum credit qualifications.

You can check your credit score through a free or paid credit score service, or it may be listed on your monthly credit card statement.

Risks of buying a home with bad credit

While mortgages are available for borrowers with low credit scores, there are some downsides to purchasing a home with a lower credit score. For example, down payment requirements will be larger, and fees will be higher.

If your loan is approved with a lower credit score, the biggest factor you’re likely to face is a higher interest rate, which means you will pay more for the same house than an individual with good credit.

» MORE: What credit score is needed to buy a house?

Buying a house with bad credit

Borrowers with low to fair credit, also known as subprime borrowers, are considered a higher risk by lenders and will have to prove their creditworthiness outside of their credit score. Bad credit isn’t an automatic denial, but you will need to bring more to the table for a lender's approval.

The following tips will show you are a serious buyer.

Demonstrate income stability

“One effective approach for someone with bad credit aiming to get lender approval is to demonstrate income stability. A stable and consistent income over time can paint a picture of financial reliability, which is music to a lender's ears,” said Taylor Kovar, a certified financial planner and the founder of Kovar Wealth Management in Lufkin, Texas.

“This demonstrates to the lender that regardless of past credit issues, you have a steady income source that could be used for repayment.”

Plan for a bigger down payment

If you are taking out an FHA loan and have a score under 580, you will be required to have a 10% down payment rather than 3.5%. Even if you aren’t using an FHA loan or have a score under 580, you should plan for a bigger down payment.

“The more you can pay upfront, the less the lender has to loan out, and the more likely they will give you a loan,” said Kovar. “This move can be a powerful bargaining chip when you have a low credit score.”

Use collateral

“Bringing something of value to use as collateral can also increase your chances of loan approval,” said Kovar. “Collateral provides a safety net for lenders and gives them a way to recoup their money if you default on the loan.”

If your lender will accept collateral, you can put up assets such as your retirement account, stocks, funds, exchange-traded funds or insurance policies.

Lower your debt load

One aspect lenders look at for all potential buyers is their debt-to-income ratio. If you have a lot of debt alongside poor credit, you look like an irresponsible borrower. You want to lower your debt as much as possible before applying for a loan.

If you have a mix of debt types, attack your credit card debt and personal loans before addressing your car loan and student loan.

Choose a government-backed loan

You aren’t automatically disqualified for a conventional loan, but government-backed loans like FHA, USDA and VA loans have more flexible requirements. These loans are a lower risk for lenders because they are backed by the government.

FHA loans are often the easiest to qualify for because they have less strict credit score and down payment requirements. Many VA loans are made with 0% down. While the VA does not set a minimum credit score for home loans, lenders who provide the loans typically ask for a minimum score of 580.

Additionally, Freddie Mac Home Possible is a mortgage program with down payments as small as 3% for low-income borrowers. Income limits depend on location. For borrowers who qualify based on income and payment references, Home Possible loans are available to borrowers without a credit score.

» MORE: FHA loans vs. USDA loans: 6 key differences

Alternatives to home buying when you have bad credit

If you have poor credit, the path to traditional homeownership through a mortgage lender might not be right for you. Instead, consider these alternatives:

  • Renting while growing your credit: This is the most common alternative to homeownership. While this might be your current situation now, it is important to use it to your advantage to improve your credit score through rent reporting companies like Rental Kharma and RentReporters.
  • Rent-to-own: In a rent-to-own arrangement, you rent a home for a certain period of time with the option to buy it before your lease expires. A portion of your rent goes toward the purchase price of the home. These agreements can be a good option for people with bad credit who want to become homeowners in the future.
  • Lease option: Similar to rent-to-own, a lease option allows you to rent a home with the option to buy at the end of the lease. However, unlike rent-to-own, your monthly rent does not go toward the purchase price.

» MORE: What is a zero-down mortgage?

Mortgage rates are fluctuating. Find your best lender now!

    FAQ

    Can I buy a home after declaring bankruptcy?

    It is possible to buy a home after declaring bankruptcy, but it may take some time. The wait time varies according to the type of bankruptcy filed, with Chapter 7 taking longer than Chapter 13. Additionally, lenders might be less willing to accept a buyer with poor credit and a bankruptcy, so you will need to improve your credit and have a large down payment to show you are not a financial risk. Read our guide to buying a house after bankruptcy.

    Can I get a home after foreclosure?

    A foreclosure has a negative impact on your credit score, which is a major factor in determining eligibility for a mortgage. However, borrowers with a foreclosure on their credit history can still get home loans from some lenders.

    If a foreclosure is less than seven years old, lenders will be less likely to approve your home loan or, if they do, will charge higher interest rates and require a larger down payment.

    Fannie Mae and Freddie Mac home loans require a seven-year waiting period after a foreclosure, while USDA and FHA loans require three years. A VA loan only requires two years to have passed from foreclosure.

    Can I refinance a bad credit home loan?

    Yes, and refinancing is a good option if you have improved your credit score since taking out the original loan.

    If you originally took out a USDA, VA or FHA loan, you can either refinance as a conventional loan or refinance with a streamline assistance program, IRRL or FHA streamline and keep your original loan type.

    Your refinance choices will depend on the refinance types your lender has to offer and your credit score.

    Can you buy a house with a 500 credit score?

    Some lenders will accept a credit score of 500 to 580 for an FHA loan. However, you will also need to put down a minimum of 10%. You should also expect a higher annual percentage rate (APR) and additional insurance costs and fees that FHA loans require.

    Bottom line

    Getting a home loan when your credit is poor is not impossible. All buyers have unique situations, and some lenders will look at your overall financial picture rather than just your credit score.

    That being said, if you can hold off on your home purchase until your credit score improves, you will increase your chances of loan approval and a lower APR.

    Article sources

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

    1. Quicken Loans, "What Are Collateral Loans And How Do They Work?" Accessed Feb. 17, 2024.
    2. Experian, “How to ‘Fix’ a Bad Credit Score." Accessed Feb. 17, 2024.
    3. Fannie Mae, “B3-5.3-07, Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit (08/07/2019)." Accessed Feb. 17, 2024.
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