Bad Credit Mortgage Lenders You Can Trust in 2021

It’s rare to be able to afford a house on your salary in modern times, and this is where home mortgage loans come to the rescue.

However, there may be an issue: many lenders refuse to give loans if you have bad credit, and if you’ve come to this article, you’re probably struggling with that. Don’t despair, since we’ve come up with our list of bad credit mortgage lenders that will help you buy your dream home even if your credit isn’t ideal.

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Top 6 Bad Credit Mortgage Lenders in 2021

1. Quicken Loans

Quicken has managed to remain one of the top mortgage lenders in the US even 35 years after its formation. Offering a quick and easy 100% online application process, it’s making the process of buying a home more convenient and less stressful while promising decent conditions and fees and ensuring the satisfaction of its customers. Full Review

  • Online application process
  • Custom fixed-rate loans
  • Diverse loan offerings
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Quicken has managed to remain one of the top mortgage lenders in the US even 35 years after its formation. Offering a quick and easy 100% online application process, it’s making the process of buying a home more convenient and less stressful while promising decent conditions and fees and ensuring the satisfaction of its customers. Full Review

Features

4/5

Fees

3/5

Ease of Signup

5/5

Ease of Funding/Deposit

5/5

2. Citibank

Citibank is a great option to consider. With fees on the lower side compared to its competition, diverse loan types, and mortgage rates you can adjust to your situation, it isn’t hard to understand why it is on our list of the best mortgage lenders for bad credit. Full Review

  • Customizable mortgage rates
  • Diverse loan offerings
  • Stellar customer reviews
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Citibank is a great option to consider. With fees on the lower side compared to its competition, diverse loan types, and mortgage rates you can adjust to your situation, it isn’t hard to understand why it is on our list of the best mortgage lenders for bad credit. Full Review

Features

4/5

Fees

5/5

Ease of Signup

5/5

Ease of Funding/Deposit

4/5

3. Network Capital

If you live in one of the 24 states where Network Capital offers their services, we urge you to consider it as a viable option for your mortgage loan needs. It has a simple mostly online application process, as well as excellent rates without the sky-high fees. Full Review

  • Mostly online application process
  • No lender fees
  • Jumbo loans up to $5 million
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If you live in one of the 24 states where Network Capital offers their services, we urge you to consider it as a viable option for your mortgage loan needs. It has a simple mostly online application process, as well as excellent rates without the sky-high fees. Full Review

Features

3/5

Fees

5/5

Ease of Signup

3/5

Ease of Funding/Deposit

4/5

4. BNC

BNC’s stellar customer reviews vouch for the quality of its services and excellent loan offers while not having unachievable requirements. Although it offers various loan types, this lender specializes in VA home loans that help veterans with bad credit get their dream home. Full Review

  • Stellar customer reviews
  • Online application process
  • Co-signer option
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BNC’s stellar customer reviews vouch for the quality of its services and excellent loan offers while not having unachievable requirements. Although it offers various loan types, this lender specializes in VA home loans that help veterans with bad credit get their dream home. Full Review

Features

5/5

Fees

4/5

Ease of Signup

5/5

Ease of Funding/Deposit

5/5

5. New American Funding

New American Funding stands out from its competition due to its manual underwriting of every application, instead of taking the automated route like many similar lenders. This guarantees a personalized experience, which, coupled with their simple application process and good rates, promises a positive experience should it become your lender of choice. Full Review

  • Online application process
  • Manual underwriting
  • Above-average mortgage rates
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New American Funding stands out from its competition due to its manual underwriting of every application, instead of taking the automated route like many similar lenders. This guarantees a personalized experience, which, coupled with their simple application process and good rates, promises a positive experience should it become your lender of choice. Full Review

Features

4/5

Fees

5/5

Ease of Signup

5/5

Ease of Funding/Deposit

5/5

6. LoanDepot

If you prefer handling all your loans digitally, loanDepot’s mello smartloan platform makes that whole process simple and easy. Although it’s a fairly new lender, loanDepot has proven its quality by listening to the customers and striving to make the loaning process as easy as it can be, combined with fair rates and a wide choice of loan options. Full Review

  • Digital home loan platform - mello smartloan
  • Diverse loan offerings
  • Has over 200 brick-and-mortar offices nationwide
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If you prefer handling all your loans digitally, loanDepot’s mello smartloan platform makes that whole process simple and easy. Although it’s a fairly new lender, loanDepot has proven its quality by listening to the customers and striving to make the loaning process as easy as it can be, combined with fair rates and a wide choice of loan options. Full Review

Features

5/5

Fees

4/5

Ease of Signup

5/5

Ease of Funding/Deposit

4/5

Our Methodology 

Here are the elements we took into consideration for this review:

  • Banking services. We’ll take a look at the relevant banking services offered by each lender, such as online banking, credit and debit cards, advancing of loans, and more.
  • Fees. Never overlook fees – they can add up and end up costing you more than planned, so you should look for lenders with a minimal fee. Not all loan providers disclose their fees upfront, but we’ll include the ones that did.
  • Low minimum balance. To get home loans with bad credit your bank balance must be above a certain minimum amount. This requirement differs for each bank – some banks even have no minimum balance.
  • Minimum down payment. In order to qualify for a mortgage loan, you need to provide a certain amount of money as a down payment. Different banks have different minimum requirements for that amount.
  • Minimum credit score. Most banks have criteria for giving out a mortgage loan which includes having a credit score above a certain minimum. If your score is not above this number you become ineligible for the loan.
  • APR range. The annual percentage rate (APR) is the rate you pay each year to borrow money. It includes interest rates and any lender fees.

Detailed Reviews

  • Online application process
  • Long time on the market
  • Custom fixed-rate loans
  • Diverse loan offerings
  • No home equity loans
  • No brick-and-mortar offices

If you appreciate the convenience of handling all your finances online, let us introduce you to Quicken Loans. Its Rocket Mortgage is one of the most popular and well-known providers of mortgage loans for bad credit in the US and is available in all states. Equity loans and lines of credit aren’t offered by Quicken, but most other more common types are.

You need a minimum credit score of 620 and a 3% down payment for most loans, the exception being their FHA loans where the minimum is only 580. Compared to the standard 15/30-year loan term, you are also free to choose your loan term between 8 and 30 years.

To apply for a Quicken home loan with bad credit you need to submit documents showing your income (tax returns and W-2s from the last 2 years, divorce decree if applicable, as well as 1099 forms and profit and loss statements in case you’re self-employed), as well as documents that show your assets and permission to check your credit history. In around one week you will get your approval and can start looking for a home.

Quicken Loans is accredited by the BBB and given a grade of A+. The customer reviews are overwhelmingly positive, praising its customer service, the simplicity of the application process, and cementing its reputation as one of the best mortgage companies for bad credit. It’s no small feat to have been on the market for over 35 years, and still maintain a good reputation and high-quality standards.

Banking services Online application process, mobile app
Minimum down payment 3%
Minimum credit score 620
Fees 3%-6% closing fees
APR range 2.62%-3.586%
Citibank
Citibank

Most Diverse Loan Types

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  • Below average closing fees
  • Customizable mortgage rates
  • Diverse loan offerings
  • Stellar customer reviews
  • Not offering USDA loans
  • Mortgage application fee
  • Offices limited only to large cities

Citibank offers a wide variety of home loans for people with bad credit – refinance, home equity, jumbo, fixed, adjustable loans, and more, available in all US states. To qualify for a mortgage loan, you need to have fair credit with a minimum credit score of 620 (580 for FHA loans), and a debt-to-income ratio no higher than 43%. You also must provide a down payment of at least 3%.

It also has a special mortgage offer called HomeRun, offering loans up to $548,250, flexible credit guidelines, and low interest rates while requiring a low down payment of 3% and no mortgage insurance.

Getting a mortgage with a low credit score isn’t impossible. You can start your application process by filling in an application form online, over the phone, or in person. To verify the information in the application, you will be required to send some documents – signed disclosures, bank statements, pay stubs, proof of down payment, W-2s, tax returns, and details of your employment. After a few days, you will get a loan estimate and home appraisal and then get your final mortgage offer.

Customers seem to like Citibank, with most customer reviews being positive, proving its place on this list of top bad credit mortgage lenders. Its Consumer Affairs overall satisfaction rating is 4/5 stars taken from 1,325 ratings. Satisfied customers describe it as a simple, effective, and professional company. There are some complaints about the behavior of customer service representatives, but they represent a few isolated cases that don’t reflect the company as a whole.

Banking services Online application process, mobile app
Minimum down payment 3%
Minimum credit score 620
Fees 1%-4% closing fees
APR range 2.579%-2.814%
Network Capital
Network Capital

Best No Lender Fee Option

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  • Mostly online application process
  • No lender fees
  • Diverse loan offerings
  • Jumbo loans up to $5 million
  • Not available in all US states
  • No customized mortgage rates

Another company on our list of mortgage lenders for bad credit is Network Capital, whose strongest suit is its no lender fee policy, meaning you won’t be required to pay any origination, application, underwriting, or processing fees. Their criteria include having a fair credit score with the lowest credit score being 620 and having a 3% minimum down payment.

Not everyone has the chance to try out Network Capital since it’s only available in 24 US states. If you do have the chance to use its services, you can choose from both conventional and government-backed loans – fixed and adjustable loans, FHA, VA, and USDA loans, as well as refinance and jumbo loans. This is a decent selection of home loans for those struggling with bad credit.

You can apply for a mortgage loan on Network Capital’s website. After three days you will be contacted by a loan officer who will request that you send the necessary documents before pulling your credit score. They try to collect most documents electronically and give their customers the convenience of a mostly online application process.

Many negative reviews mention their aggressive marketing calls by relentless sales representatives, but at the same time, the positive reviews praise the professionalism and helpfulness of the customer service representatives. Network Capital has been accredited by the BBB and has a grade of A+. But is it the best mortgage lender for bad credit? Possibly. We’ll leave the decision up to you.

Banking services Online application
Minimum down payment 3%
Minimum credit score 620
Fees No lender fees
APR range N/A
BNC
BNC

Best VA Home Loans

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  • Stellar customer reviews
  • Nationwide availability
  • Online application process
  • Co-signer option
  • Limited number of brick-and-mortar offices
  • Mortgage rates aren’t public

BNC National Bank is yet another provider of home loans for those with bad credit. You can choose between fixed-rate and adjustable-rate mortgages, as well as hybrid adjustable-rate mortgages, Harp 2.0, and the government-backed FHA and VA loans, in which they have extensive experience. In fact, they are known as one of the top 10 VA lenders in the US.

Unfortunately, BNC chooses not to make its mortgage rates public, so it’s difficult to decide without submitting your information for a personalized offer. But let’s focus on the information that we do have. The good news is that BNC is available nationwide and they offer the option of having a co-signer. The minimum credit score needed to buy a house with BNC’s help is 620, and the minimum down payment percentage is 3%.

To apply for a BNC loan, simply go to their website and fill in their online application form. Almost everything is done remotely and online, and you don’t really need to talk to anyone unless you have any questions. In that case, you can contact their customer service. Most documents can also be e-signed and uploaded. They also offer a mobile app which makes the whole process even more convenient.

BNC has the most overwhelming number of positive reviews compared to the others on our list, so it may possibly hold the title of best mortgage lender for bad credit. 8,777 reviews on Social Survey give BNC an average score of 4.86, and it has a similar score of 4.69 on Zillow. It’s clear that BNC has many satisfied customers, but, is there something they don’t like? Well, there are only two complaints submitted on the BBB website both of which have been resolved. It seems that most negative reviews are about the customer service representatives’ poor communication or unprofessionalism.

 

New American Funding
New American Funding

Best Personalized Experience

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  • Online application process
  • Manual underwriting
  • A+ grade from the BBB
  • Not available nationwide
  • Above-average mortgage rates

Another place where you can apply for a home loan with bad credit is New American Funding, which specializes in California home loans. They offer different loan types: fixed and adjustable-rate mortgages, conventional, VA and FHA loans, reverse mortgages, and a special I CAN mortgage offer which has a negotiable term length and helps build home equity.

To qualify for a New American Funding loan you need to have a fair credit score of at least 620, and to be ready to put down a 3% down payment as well as a 1% origination fee. Of course, you also need to live in one of the 31 states where it is available.

The application process is simple and straightforward and can be done online, through the phone, or in person. If you choose the online application route, you can upload all documents and add e-signatures. Unlike other bad credit mortgage lenders, New American Funding takes its time to manually check each application – we praise their use of manual underwriting for the assessment of the applications instead of just leaving the decision up to an algorithm.

As for the customers’ opinion, at the time of writing, New American Funding has received 105 complaints on the BBB website. However, most of these complaints have been successfully resolved by the company. The BBB itself has given New American Funding the grade of A+ and has accredited it in 2004. Although the overall customer opinion is positive, describing the service as “flawless”, there are also some unpleasant experiences, most often due to the customers not receiving clear and prompt responses to their questions and feeling uninformed. Many customers recommend it as a great choice for every first time home buyer with bad credit.

Banking services Online application, mobile app
Minimum down payment 3%
Minimum credit score 620
Fees 1% origination fee
APR range N/A
LoanDepot
LoanDepot

Best New Mortgage Lender

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  • Digital home loan platform - mello smartloan
  • Diverse loan offerings
  • Has over 200 brick-and-mortar offices nationwide
  • Requires personal info before disclosing fees and rates
  • Higher down payment compared to other lenders on the list

With loanDepot, you can choose between a number of mortgage loans for people with bad credit: fixed and adjustable-rate mortgage, VA loans, FHA loans, conventional loans, jumbo loans, 203(k) loans, as well as refinancing options.

To qualify, you need to be prepared for a down payment of 3% minimum, as well as to have a minimum credit score of 620, but this number can vary; jumbo loans require a score of 700, while FHA loans require only a 580 minimum credit score for approving your mortgage loan. All of the mortgages have a lifetime guarantee.

Per their website, the documents you need to apply for a loanDepot mortgage loan are:

  • Tax returns for the past two years
  • W-2 forms for the past two years
  • Paycheck stubs from the past few months
  • Proof of rent payments or mortgages for the past year
  • A list of all your debts, including credit cards, student loans, auto loans, and alimony
  • A list of all your assets, including homes, cars, bank statements, and any investment accounts

If you prefer going the digital route, loanDepot has developed a digital home loan platform called mello smartloan which has all the features to help you through your digital application process.

loanDepot pride themselves on their customer-centric approach, but what do their customers have to say? Although there are some complaints mostly about the slowness of their service, most customers agree that they had an excellent overall experience – BBB ratings give it a score of 3.81/5. Conclusion? IoanDepot deserves to be on our list of best bad credit mortgage lenders.

Banking services Digital loan platform
Minimum down payment 5%
Minimum credit score 620
Fees Origination fee 1%-5%
APR range N/A

What is a Bad Score

If your FICO score is below 670, then it is considered a bad credit score. This makes obtaining loans harder, but not impossible. The whole point of our article is to introduce you to some bad credit mortgage lenders so that you also have the chance to purchase a home. Here are the factors that influence your credit score:

Payment history

Your payment history tracks your payments – whether you’ve been doing them regularly on time, whether you’ve missed any, or paid them too late. You must be regular with your payments since your payment history has a large impact on your FICO score – it accounts for 35% of it. This is one of the easiest factors to influence, but it’s your choice whether that influence will be good or bad.

Owed Amount

The amount you owe accounts for 30% of your credit score. Your credit utilization ratio should be low, meaning that a smaller part of your credit should be utilized for loans and debt. The higher it is, the more your credit score will suffer, and if more than 30% of your available credit is used, it doesn’t bode well for your score, making you resort to looking for bad credit mortgage lenders.

Length of credit history

The longer you’ve had a credit account, the better it will impact your score. Seven years and up are considered to be a decent length of credit history. Although the length of your credit history only accounts for 15% of your credit score, it still is an important factor you should take into consideration.

Types of credit

It’s always a plus to have a mix of different types of credit such as mortgages, student loans, and personal loans to make your credit history diverse and show that you can pay off more than one type. This factor accounts for 10% of your resulting credit score.

New credit

The final 10% of your credit score is influenced by looking for new credit too often. Every time you inquire about a new credit, a hard credit check is carried out which may cause your score to drop in the future. Make sure you avoid applying for too many new credits within a short period.

Types of Home Loans for Bad Credit

Different borrowers have different needs. This is why most mortgage lenders offer a wide variety of loan types to satisfy their customers’ needs and to match their requirements. Here are the most common types:

FHA loans

The Federal Housing Administration (FHA) offers to help low credit borrowers by guaranteeing the mortgage loan issued by an FHA-approved lender. With the FHA’s help, your down payment can be as low as 3%, giving you the chance to purchase your dream home. Additionally, FHA home loans tolerate bad credit scores and usually have lower credit requirements compared to other loan types.

VA loans

VA loans are fairly similar to FHA loans. They are offered by the Department of Veterans Affairs as a way to help veterans become homeowners by guaranteeing a part of the loan from a private lender and with that enabling the borrowers to get better loan terms.

USDA loans

This loan is offered by the US Department of Agriculture and is meant to assist homebuyers who are looking to buy a home in the suburbs or rural areas. If a potential borrower is struggling with securing a loan from conventional sources, a USDA loan can come to the rescue, especially for bad credit mortgage loans.

Conventional loans

The previous loan types we talked about are all guaranteed by some type of government organization, but conventional loans are not. They are the most commonly used option since not a lot of people are eligible for government-backed loans. Basically, with conventional loans, the only involved parties are you and your private lender. You are the one who guarantees your loan. It is, however, harder to qualify for a conventional loan because of the many criteria that need to be satisfied, especially if you’re looking for a mortgage with a bad credit score.

What Factors do Mortgage Lenders Consider

So, what is actually important when applying for a loan? Here are the things that will influence the loan offer you receive:

Down Payment Amount

The down payment is the amount of money you already have and can contribute towards the purchase of your home. The bigger your down payment, the less money you need to borrow. You can use a high down payment to make up for your bad credit when applying for mortgage loans.

Even though there’s no down payment needed for some mortgage loans, it is wise to include some down payment if you have the funds, since it will have a positive impact on the loan offer you receive and will also leave you with lower interest rates and less money to repay over the years.

There are some good points for having a small down payment as well. Not everyone can give all of their savings for one purpose and it’s always best to leave a certain amount for emergencies or any future renovations of the home. Keeping your down payment small and not wasting time on collecting the money for a larger down payment will help you get your dream home sooner, regardless of whether you’re looking for a mortgage with bad or good credit.

Debt-to-Income Ratio

To calculate your debt-to-income ratio, divide your monthly debt payments by your gross monthly income (before taxes and other deductions). The maximum ratio you can have and still qualify for a mortgage loan is 43%, but lenders usually look for ratios no higher than 36%.

The lower your debt-to-income ratio is, the better you look to the lenders since it seems like you have your debt and income balance in order, while a higher ratio indicates bad debt management and doesn’t look good on your application.

Income and Assets

This is yet another thing that can help get home loans for a first time buyer with bad credit. Your income and assets details show your potential lender how much of a risk you are to lend money to. If you have a higher income, you can afford to have a higher monthly payment.

It’s also important to include all your valuable assets, since they contribute to your overall net worth, making you more appealing to your potential lender. They are also taken into consideration as a payment alternative in case you lose your job at some point.

Length of Employment History

By having a longer employment history you prove that you have a consistent and steady income that is crucial for you to make regular mortgage payments each month. In a lot of cases, you need to have at least two years of employment history to be considered for a mortgage loan.

Co-signers

Having a co-signer for your mortgage loan means that you agree to share the responsibility for it. Two are always better than one, making it easier to apply for a home loan with bad credit. Having an additional person to vouch for you when your credit isn’t good enough can make your mortgage application stronger as well as help you get a better offer.

In many cases, the co-signer doesn’t even reside in the home, but they are a family member or a friend helping someone out without getting anything in return. Although it sounds noble and generous, it’s actually a huge responsibility – if the main lender fails to make their payments, the co-signer is next in line to ensure all debts are paid on time.

Tips on How to Improve Your Credit Score

If you’ve just realized that you don’t have the credit score needed to buy a house, we have a few tips on how to improve it. Your credit score changes often due to the factors we already mentioned, but here is what you can do to improve your credit score:

Pay your bills regularly and on time

This is a no-brainer and extremely easy to do. Provided you have a steady income, make a point of paying your bills as soon as you receive them. You may even consider setting up a reminder or an alarm to make sure you don’t forget.

Ease off the new credit applications

Any hard check made to your credit hurts your score. However, having too many hard checks in a short period makes you seem like a risky borrower and soon enough you’ll find yourself looking for home loans for people with bad credit, instead of regular ones.

Try not to go over the 30% mark for credit utilization

Ease off the credit utilization as it can have an effect on your credit score and it looks bad on your future loan applications. Try to keep credit utilization below 30%.

Bad Credit Mortgage Lenders – At a Glance

Quicken Loans (Rocket Mortgage) – Best online loan
Citibank – Most diverse loan types
Network Capital – Best no lender fee option
BNC – Best VA home loans
New American Funding – Best personalized experience
loanDepot – Best new mortgage lender

Wrap Up

We understand the challenge of finding the right mortgage loan, let alone when you have the disadvantage of a bad credit score. We hope that our selection of bad credit mortgage lenders ended your search for a suitable lender that will facilitate the purchase of your dream home. If not, we hope that you will put our tips into practice and work towards improving your credit score so that eventually you can afford to take a loan for your dream home.

FAQ

What is the best lender for a bad credit home loan?

It’s hard to choose one, since the answer is very subjective. It depends on what the borrower expects and whether these expectations can be met by the particular lender. You can choose one out of our list.

Can you get a home loan with bad credit?

Yes! Admittedly, it’s harder to get a mortgage loan when you have bad credit, but it isn’t impossible. This is the reason why we wrote this article – we tried to find the best lenders so that even those with a bad credit rating have the chance to get a good loan offer.

What is the lowest credit score to get a mortgage?

There is no definite answer to this question, but looking at the minimum credit requirements of the bad credit mortgage lenders on our list, most of them require a minimum score of 620 (580 for FA loans).