We are committed to full transparency in our mission to make the world smarter, happier, & richer. Offers on The Ascent may be from our partners - it's how we make money - and we have not reviewed all available products and offers. That transparency to you is core to our editorial integrity, which isn’t influenced by compensation.
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 mortgage loans for bad credit, there are options out there.
A lot of the best mortgages for bad credit are loans backed by government agencies including the Federal Housing Administration (FHA), the Veteran's Administration (VA), or the U.S. Department of Agriculture (USDA).
Diverse loan products and terms make it a flexible lender for many needs, including several no PMI options to choose from. Read Full Review
Low rates and a diverse set of loan terms and products are a rare combo. A guaranteed fast closing simplifies the homebuying process. Read Full Review
First-time homebuyers will benefit from the no income requirement loan product and access to FHA loans. Read Full Review
The diverse set of loan products and terms and relationship discounts make it a top pick, particularly for first-time homebuyers. The high customer satisfaction ratings are the cherry on top. Read Full Review
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
While some lenders make conventional loans to homebuyers 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.
There are three primary options for government-backed loans that could be available to borrowers looking for bad credit mortgage 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.
VA Loans are also issued by private lenders, but this time the Veterans Administration 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.
The USDA offers two programs for would-be homebuyers. 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.
While you can get a mortgage with poor 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.
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%.
If you're buying a home with a low credit score, here are the key steps you should take:
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2020
The Ascent. All rights reserved.