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Best Mortgage Lenders For Bad Credit

Best mortgage lenders for bad credit for 2024

Bronwyn Petry

By Bronwyn Petry

🗓️

Updated: January 02, 2024

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Most of us have made some “bad” decisions with money — whether it’s spending a tax refund on a vacation when we should’ve paid some bills, or maxing out a credit card by subscribing to too many streaming services. 

But bad decisions with money can accumulate and affect your credit score, and a bad credit score can throw a wrench into achieving some of your “grown-up” goals — like becoming a homeowner. 

The good news is bad credit doesn’t have to stop you from qualifying for a mortgage, or from closing on the home of your dreams.

We did a deep dive on the best mortgage lenders who not only can give you a hand with your bad credit, but who also have stellar ratings on the Better Business Bureau.

If you realized later than most that you’d like to buy a home, or repair the wreckage of your credit score, here is a breakdown of a few of your options when looking for a “bad credit mortgage.”

5 best mortgage lenders for borrowers with low or bad credit

5

Affinity Mortgage Brokers

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Quick Facts

Although Affinity Mortgage Brokers (AMG) is based in Colorado Springs, it serves eight states across the country. This company is veteran-owned and its employees have more than 100+ years experience in the industry.

Why we like Affinity Mortgage Brokers

Although Affinity Mortgage Brokers (AMG) is based in Colorado Springs, it serves eight states across the country. This company is veteran-owned and its employees have more than 100+ years experience in the industry.

Some of their brokers have access to programs that lend to borrowers with credit scores of 580, or less (on a case-by-case basis).

As you might expect, some of the services Affinity offers is help with various Veteran Affairs loans, (as well as access to VA loan counselors), refinancing and first-time homebuyers. 

The key to Affinity Mortgage Brokers is how they will work with you to get the rates that work best for your financial situation. 

You will need money for your closing costs, but they can help negotiate a down payment rate between 3.5% and 20%. 

AMG gets sound reviews from the customers who have borrowed from them, who praise their communication, accountability and how quickly they have closed the sale.

AMG manually underwrites (reviews) loans, so if you have any questions about your eligibility, you should consider submitting an application. 

4.5

Better Mortgages

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Quick Facts

A "family" of companies serving all your homeownership needs. Highly streamlined online application process. Serves all 50 states, excluding the territory of Puerto Rico.

Why we like Better Mortgages

If you want to shop for your new house from the comfort of your current one, this may be the mortgage lender for you. Better.com offers a locked rate and loan commitment letter to each qualifying applicant within 24 hours. This company’s strength is in the online convenience, and how they make it easy for customers to create an account, check their mortgage pre-approval (without a hard credit check) and apply for mortgages or home equity loans from their laptops. 

They offer a range of fixed- and adjustable-rate mortgages for single-family and multi-family homes, and also FHA and VA loans (but not USDA loans). 

Borrowers need to have a minimum credit score of 580 to get the down payment rate of 3.5% on a FHA loan, and their debt to income ratio (DTI) needs to be under 50%.

Worth a mention is Better.com’s most unique offering: their Better Cash Offer program, where they supply the funds you’re missing so you can make a cash offer.

4

New American Funding

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Quick Facts

170 locations nationwide and more than 3,470 employees. Works directly with down payment assistance programs. More than one third of NAF's mortgage loans go to minority borrowers.

Why we like New American Funding

New American Funding serves clients in all states except Hawaii, so NAF is a solid option for the majority of Americans with low credit. They offer comprehensive support with most types of “bad credit” loans, including Federal Housing Administration (FHA loans), USDA loans (for lower-income borrowers who want to own a primary residence in a rural area) and VA loans, as well as mortgages for self-employed borrowers. 

The lowest credit score they typically work with is 580, but if you are able to put down a larger amount of cash upfront, they are willing to negotiate. 

Their services are available online and in person. 

5

Optimum First Mortgages

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Quick Facts

Licensed to lend mortgages in 17 states. Fourteen-day closing average on conventional loans. Offer mortgage loans to self-employed borrowers.

Why we like Optimum First Mortgages

Optimum First Mortgages definitely checks some boxes for the bad credit borrower. 

If you are concerned about locking in a particular rate, OFM locks it in from the date of your first conversation (as long as you’ve submitted all their required documentation). Locked rates then hold for 90 days. You are also able to roll your closing costs into your loan. 

Their lowest down payment rates for FHA and conventional loans are standard for the industry: 3.5% and 5%, respectively. Beyond the fixed-rate and adjustable rate mortgages and FHA loans they offer, they also finance VA loans, and have various refinancing options. 

They also offer mortgages for self-employed, or “alternative-income” based loans, but for these they quote on a case-by-case basis.You can get a mortgage rate quote for the property you have in mind within a few minutes by answering a few questions on their website. While Optimum offers a closing-rate guarantee, they also promise you $1,000 back if they don’t close on the agreed-upon date. 

Their mortgage underwriting is completed in one day, and they also monitor interest rates so you’re automatically notified when lower rates are available.

5

Prosperity Home Mortgage

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Quick Facts

Three percent down first-time homeowner loan program. FHA Streamline and USDA loans. Local underwriters. More than 700 branches across the U.S.

Why we like Prosperity Home Mortgage

Prosperity has a few programs geared toward the “bad credit borrower.”  Uplift ensures that qualified FHA and VA loan applicants receive lower rates and fees. BorrowSmart helps each qualifying borrower out with $1,500 in closing cost or downpayment assistance. 

Fixed- and adjustable-rate mortgages are both available. Prosperity also offers a pre-qualification. The pre-qualification is not the same as a loan approval, but will give you an estimate of how much you can borrow.

Prosperity will grant USDA loans to borrowers with a 500 credit score. VA loan minimums are 580, and conventional are 620 — a typical down payment on a conventional loan is 3%. But don’t let that stop you, because that is where their local, *human* underwriters can come in handy. If you have built up certain habits of creditworthiness, it is worth your while to talk with someone in person. 

Mortgage and credit FAQs

  • What is the lowest acceptable credit score to get approved for a mortgage?

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    Generally speaking, unless you apply through a specialized program, the lowest acceptable credit score to get approved for a mortgage is 620. But there are exceptions.

    If you apply for a mortgage with the FHA, you can be approved for a loan with a credit score of 580. If you qualify for the VA loan program, there is no minimum credit score required — rather, the U.S Department of Veterans Affairs requires the lender to look over your entire application.

  • Can I get a second mortgage with bad credit?

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    Yes, but it may not be the best option. First, a second mortgage is a way for you to tap the equity on the home that you already own. By agreeing to a second mortgage, the lender, or bank, usually takes out a lien on the property you’re offering. This can be risky, as it means the lender can repossess your home if you default on your loan.

    If you have a lower credit score, to get a second mortgage you may need to have a well-established relationship with your lender, or a co-signer.

  • Can first-time buyers with a bad credit history get approved for a mortgage?

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    Yes, you can, although you may have to put a little more legwork into finding a lender that will work with you. If you have bad credit, you can work on the other things lenders will look at when deciding whether you’re a good candidate for home ownership:

    1. Build up good creditworthiness by paying your bills and rent on time and dealing with any collections as soon as you can.

    2. Make sure your debt-to-income ratio (how much debt you have compared to your salary) is as low as possible. Some lenders will approve DTIs as high as 43%, but aim to have it around 36%.

    3. If you can, save a cash down payment of around 10%.

  • How far back into my credit history will mortgage lenders look?

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    When you apply for a mortgage, lenders will typically look at the last seven years of your credit history, which, in the U.S., is the lifespan of a bad credit mark.

  • Does having bad credit make my mortgage more expensive?

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    Yes, typically having bad credit makes your mortgage more expensive, because, on paper, you're riskier to lend to - though it's always worth it to talk to a mortgage lender in person.

Methodology

Product rankings are determined by the Moneywise editorial team and are based on factors and features that everyday users care about most. We adhere to strict standards of editorial integrity to help you make decisions with confidence. The products and companies featured in this article were independently selected, but please be aware that some products and services linked in this article are from our sponsors.

We looked up mortgage lenders that served multiple states on the Better Business Bureau's website, finding the highest rated. We then cross-referenced the highest-rated lenders against BBB reviews to see if customers had a positive experience. As a result, the star rating for this list comes from BBB. 

Our goal is to provide an independent review, and give you the information you need to make a decision on which service is best for you.

Bronwyn Petry Email Specialist

Bronwyn is currently part of the email content team for Moneywise. Before starting here, they freelanced for several years, focusing on B2B content and technical copy. Pre-pandemic, you could find them planning their next trip, but lately, if they're not at work, you can find them hanging out with their cat and dog.

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