Getting a mortgage with bad credit has become increasingly difficult, with mortgage application rejections rising from 10.2% in 2019 to 12.1% in 2023 and 20.7% in 2024. If your credit score is below 620, you’re likely worried about whether you can still buy a home.
Here’s the reality: Having a low credit score doesn’t automatically disqualify you from getting a mortgage. Several major lenders specialize in helping borrowers with credit scores between 500 and 620 get approved for home loans. The key is knowing which lenders to work with and which loan programs to apply for.
In this guide, you’ll discover the 7 best mortgage lenders that accept bad credit applications in 2025, including their minimum credit score requirements, down payment options, and loan programs. Whether your credit score is 550, 580, or 600, there’s a lender on this list that can help you become a homeowner.
The best part? Many of these lenders offer FHA loans, which require as little as 3.5% down and accept credit scores as low as 580. Some will even work with borrowers who have scores as low as 500 if you can make a larger down payment.
Quick Comparison: Best Bad Credit Mortgage Lenders
| Lender | Min. Credit Score | Min. Down Payment | Best For |
|---|---|---|---|
| Rocket Mortgage | 580 | 3.5% (FHA) | Fast closings & digital process |
| Carrington Mortgage | 500 | 10% (FHA with 500 score) | Lowest credit scores accepted |
| New American Funding | 580 | 3.5% (FHA) | Self-employed borrowers |
| Guild Mortgage | 540 | 3.5-10% (varies) | Down payment assistance programs |
| CrossCountry Mortgage | 500 | 3.5-10% | Credit scores in the 500s |
| Freedom Mortgage | 550 | 3.5% (FHA) | FHA streamline refinances |
| Veterans United | 580 (VA loans) | 0% (VA loans) | Military members & veterans |
Understanding Bad Credit Mortgage Requirements in 2025
Before diving into specific lenders, it’s important to understand what “bad credit” means in the mortgage world and what your options are.
What Credit Score Do You Need for a Mortgage?
For conventional mortgages, most lenders require a minimum credit score of 620. However, government-backed loans like FHA mortgages have much lower requirements. FHA loan applicants must have a minimum FICO score of 580 to qualify for the low down payment advantage which is currently at 3.5%. If your score falls below 580, you can still qualify, but you’ll need to put down at least 10%.
Here’s how credit score requirements break down:
- Conventional loans: Typically require 620+ credit score
- FHA loans with 3.5% down: Require 580+ credit score
- FHA loans with 10% down: Accept 500-579 credit scores
- VA loans: No official minimum, but most lenders require 580+
- USDA loans: Typically require 580-640
Why FHA Loans Are Best for Bad Credit
FHA loans are insured by the Federal Housing Administration, which means lenders take on less risk when approving borrowers with poor credit. This government backing allows lenders to offer more flexible qualification requirements than conventional mortgages.
Key benefits of FHA loans for bad credit borrowers include lower down payments, more lenient debt-to-income ratio requirements, and the ability to qualify with recent financial setbacks like bankruptcy or foreclosure (after waiting periods).
The 7 Best Mortgage Lenders for Bad Credit in 2025
1. Rocket Mortgage – Best for Fast Closings & Digital Experience
Minimum Credit Score: 580 (FHA loans)
Minimum Down Payment: 3.5% (FHA)
Loan Types: FHA, VA, USDA, Conventional
Rocket Mortgage stands out as one of the nation’s largest providers of FHA loans, which are available with a credit score of 500 if you put 10% down. While their standard minimum is 580 for the 3.5% down option, they process applications quickly and offer an entirely digital mortgage experience that many borrowers prefer.
Why choose Rocket Mortgage:
- 100% online application and approval process
- Fast closing times (typically 30-45 days)
- Strong customer service ratings
- Large volume of FHA loan approvals
- Mobile app for tracking application progress
Potential drawbacks: Interest rates may be slightly higher than some competitors, and the fully digital process may not appeal to borrowers who prefer in-person guidance.
Best for: Tech-savvy borrowers who want a fast, streamlined digital mortgage experience and have credit scores of 580 or higher.
2. Carrington Mortgage Services – Best for Lowest Credit Scores
Minimum Credit Score: 500 (FHA, VA), 550 (USDA), 620 (Conventional)
Minimum Down Payment: 10% (500-579 score), 3.5% (580+ score)
Loan Types: FHA, VA, USDA, Conventional, Non-QM, Jumbo
Carrington Mortgage Services specializes in helping borrowers with poor credit or recent financial setbacks qualify for a mortgage. They offer second-chance mortgage options that many traditional lenders won’t consider, making them an excellent choice for borrowers with credit scores in the 500-579 range.
Why choose Carrington:
- Accepts the lowest credit scores (as low as 500)
- Specializes in working with borrowers who have had bankruptcies or foreclosures
- Offers Non-QM loan programs for self-employed borrowers
- Flexible Advantage programs for unique situations
- Experienced underwriters who manually review applications
Potential drawbacks: Interest rates may be higher than lenders with stricter credit requirements, and approval process can take longer due to manual underwriting.
Best for: Borrowers with credit scores between 500-579 who have been turned down by other lenders or those recovering from major financial setbacks.
3. New American Funding – Best for Self-Employed Borrowers
Minimum Credit Score: 580 (FHA, VA), 620 (Conventional)
Minimum Down Payment: 3.5% (FHA), 0% (VA)
Loan Types: FHA, VA, USDA, Conventional, Non-QM
New American Funding is a nationwide lender offering a wide range of loan options, including programs for borrowers with low credit scores or nontraditional income. They excel at working with borrowers whose income situations don’t fit traditional lending guidelines, making them ideal for self-employed individuals, freelancers, and gig workers.
Why choose New American Funding:
- Personalized underwriting for unique situations
- Strong track record with self-employed borrowers
- Flexible qualification criteria
- Local loan officers available nationwide
- Connection to down payment assistance programs
Potential drawbacks: The 580 minimum is higher than some competitors who accept 500 scores, and rates may vary significantly based on your specific situation.
Best for: Self-employed borrowers, freelancers, or anyone with nontraditional income who has a credit score of 580 or higher.
4. Guild Mortgage – Best for Down Payment Assistance
Minimum Credit Score: 540 (FHA with 10% down)
Minimum Down Payment: 3.5% (FHA), 0% (VA, USDA), 1% (with assistance)
Loan Types: FHA, VA, USDA, Conventional, HomeReady, Home Possible
Guild Mortgage is among the best FHA lenders for bad credit. They accept credit scores as low as 540 if you can put 10% down. What sets Guild apart is their connection to over 700 down payment assistance programs across the country.
Why choose Guild Mortgage:
- Zero Down program combining FHA with second loan for down payment
- 1% Down Payment Advantage program with 2% grant
- Access to over 700 down payment assistance programs
- HomeReady and Home Possible programs for low-to-moderate income buyers
- Strong presence in underserved communities
Potential drawbacks: Not available in all states, and down payment assistance programs often have income restrictions.
Best for: Borrowers who struggle to save for a down payment or those in low-to-moderate income brackets who qualify for assistance programs.
5. CrossCountry Mortgage – Best for Credit Scores in the 500s
Minimum Credit Score: 500 (FHA)
Minimum Down Payment: 10% (500-579), 3.5% (580+)
Loan Types: FHA, VA, USDA, Conventional
CrossCountry is a major FHA lender by loan volume, with options for a variety of FHA loan borrowers. They’re known for their fast closing times and down payment assistance options for qualified buyers.
Why choose CrossCountry Mortgage:
- Accepts credit scores as low as 500
- Average closing time of 21 days (faster than industry standard)
- Up to $6,500 in down payment assistance for qualified borrowers
- High market share of FHA loans
- Experienced with challenging credit situations
Potential drawbacks: Interest rates and origination fees may be higher than competitors, and rates are not published online.
Best for: Borrowers with credit scores in the 500-579 range who need to close quickly.
6. Freedom Mortgage – Best for FHA Streamline Refinances
Minimum Credit Score: 550 (purchase), 550 (cash-out refinance), No minimum (streamline refinance)
Minimum Down Payment: 3.5% (FHA purchase)
Loan Types: FHA, VA, USDA, Conventional
At Freedom Mortgage, our current minimum FHA loan credit scores depend on whether you want to buy a home or refinance a home. When you want to buy a home with an FHA loan, we can often accept a minimum credit score as low as 550. They’re particularly strong for borrowers who already have an FHA loan and want to refinance to a lower rate.
Why choose Freedom Mortgage:
- Lower minimum credit score than many competitors (550)
- FHA streamline refinances require no credit check
- Top FHA lender by volume
- Experienced with lower credit score approvals
- Strong refinance department
Potential drawbacks: Limited information available online, and you’ll need to contact them directly for rate quotes.
Best for: Borrowers with existing FHA loans looking to refinance, or home buyers with credit scores between 550-579.
7. Veterans United Home Loans – Best for Military & Veterans
Minimum Credit Score: 580 (VA loans)
Minimum Down Payment: 0% (VA loans)
Loan Types: VA, FHA, Conventional
Veterans United Home Loans scores well for affordability, availability and borrower experience, and we selected it as the best lender for bad- or lower-credit borrowers in the 2025 Bankrate Awards. They specialize in VA loans for military members and veterans, offering zero down payment options even with lower credit scores.
Why choose Veterans United:
- No down payment required on VA loans
- Free credit consulting for service members
- Highest customer satisfaction ratings for VA lenders
- Accept credit scores as low as 580 for VA loans
- Specialized knowledge of military benefits and programs
Potential drawbacks: Only available to military members, veterans, and eligible spouses. Non-VA loan options are more limited.
Best for: Active duty military, veterans, National Guard, Reserves, and surviving spouses who qualify for VA loan benefits.
How to Improve Your Approval Odds with Bad Credit
Even with a low credit score, there are several strategies you can use to improve your chances of getting approved for a mortgage:
1. Lower Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio compares your monthly debt payments to your gross monthly income. Most FHA lenders prefer a DTI of 43% or lower, though some will go as high as 50% with compensating factors. Pay down credit card balances, car loans, and other debts before applying.
2. Save a Larger Down Payment
If your credit score is between 500-579, you’ll need at least 10% down for an FHA loan. But putting down even more—say 15% or 20%—can significantly improve your approval odds and help you get a lower interest rate. A larger down payment shows lenders you’re less of a risk.
3. Get a Co-Signer
Having a co-signer with good credit can dramatically improve your approval chances. The co-signer is equally responsible for the mortgage, so choose someone who trusts you and understands the commitment they’re making.
4. Dispute Credit Report Errors
Check your credit reports from all three bureaus (Experian, Equifax, and TransUnion) for errors. Incorrect late payments, accounts that don’t belong to you, or other mistakes can drag down your score. Dispute any errors you find, as removing them could boost your score by 20-50 points.
5. Wait Out Negative Items
If you’ve had a bankruptcy, foreclosure, or other major credit event, you may need to wait before applying. FHA loans typically require a 2-year wait after bankruptcy discharge and 3 years after foreclosure. Use this time to rebuild your credit and save money.
6. Shop Multiple Lenders
Different lenders have different credit requirements and “overlays” beyond the basic FHA minimums. One lender might reject your 560 credit score while another accepts it. Shop at least 3-5 lenders to find the best fit.
What to Expect: Interest Rates with Bad Credit
Let’s be honest: Having bad credit will cost you more money in the long run. Lenders charge higher interest rates to borrowers with lower credit scores because they represent higher risk. Understanding the real cost can help you decide whether to apply now or spend time improving your credit first.
The Real Cost of Higher Rates
Say you’re obtaining a $380,000, 30-year mortgage with a fixed 7 percent rate. Your monthly payment would be $2,528, and you’d pay $530,134 in interest over the 30-year loan term. If you were to improve your credit and get a lower rate of 6.5 percent instead, your monthly payment would drop to $2,402, and you’d pay $484,669 in interest for the duration of the loan.
That’s a difference of over $45,000 in interest payments—just from a half-point rate reduction. With bad credit, you might be quoted rates 1-2% higher than borrowers with excellent credit, which could cost you $80,000-150,000 extra over the life of the loan.
How Much Can You Afford?
Use this quick calculation to estimate what you can afford:
- Monthly payment should be no more than 28-31% of gross monthly income
- Total debt payments (including mortgage) should be under 43-50% of gross monthly income
- Don’t forget to account for property taxes, homeowners insurance, and HOA fees
If you make $4,000 per month, your maximum monthly housing payment should be around $1,120-1,240. At a 7% interest rate, this would allow you to borrow approximately $165,000-180,000 (depending on down payment and other factors).
Alternative Options If You Can’t Qualify Now
If you’ve applied to multiple lenders and keep getting denied, don’t give up. Here are some alternative paths to homeownership:
Rent-to-Own Agreements
Rent-to-own homes let you rent a property with the option to buy it later. A portion of your rent payments may go toward the eventual down payment. This gives you time to improve your credit while building equity.
Owner Financing
Some sellers will finance the purchase themselves, especially in slow markets. The seller acts as the lender, and you make payments directly to them. Terms are negotiable, and credit requirements are often much more flexible.
Credit Builder Programs
Many credit unions and community banks offer credit builder programs designed to help you establish or improve your credit. These typically involve small loans held in savings accounts that you pay off over 12-24 months.
Wait and Improve Your Credit
Sometimes the best option is to spend 6-12 months aggressively improving your credit score before applying. Focus on paying down debt, making all payments on time, and disputing any errors on your credit report. Even a 30-50 point increase can make a huge difference in your approval odds and interest rate.
Required Documents for Bad Credit Mortgage Applications
When applying for a mortgage with bad credit, lenders will scrutinize your application more carefully. Having all required documents ready upfront can speed up the process and improve your approval chances.
Essential Documents You’ll Need:
- Proof of income: Last 2 years of tax returns, recent pay stubs (last 30-60 days), W-2 forms
- Bank statements: Last 2-3 months for all accounts (checking, savings, retirement)
- Employment verification: Letter from employer, contact information for HR department
- Credit explanations: Written letters explaining any late payments, collections, or derogatory marks
- Down payment source: Documentation showing where your down payment money came from
- Identification: Driver’s license or state ID, Social Security card
- Rental history: Last 12 months of canceled checks or receipts showing on-time rent payments
- Debt documentation: Current statements for all debts (car loans, student loans, credit cards)
Letter of Explanation Tips
For any negative items on your credit report, you’ll likely need to write a letter of explanation. Keep these brief (1 page max), factual, and forward-looking. Acknowledge the issue, explain what happened (job loss, medical emergency, etc.), and describe what you’ve done to prevent it from happening again.
Frequently Asked Questions
Can I get a mortgage with a 500 credit score?
Yes, but it will be difficult. FHA loans technically allow credit scores as low as 500, but you’ll need to put down at least 10%. Only a handful of lenders actually accept 500 scores—most have overlays requiring 550-580 minimum. Carrington Mortgage and CrossCountry Mortgage are two lenders known to work with 500-score borrowers.
How much down payment do I need with bad credit?
If your credit score is 580 or higher, you can put down as little as 3.5% with an FHA loan. If your score is between 500-579, you’ll need at least 10% down. For VA loans (military only), no down payment is required regardless of credit score. Conventional loans typically require 5-10% down even with good credit.
Will applying for a mortgage hurt my credit score?
Each mortgage application creates a “hard inquiry” on your credit report, which can lower your score by 2-5 points temporarily. However, multiple mortgage applications within a 14-45 day window are typically counted as a single inquiry. This allows you to shop multiple lenders without major credit damage.
How long after bankruptcy can I get a mortgage?
For FHA loans, you must wait 2 years after a Chapter 7 bankruptcy discharge or 12 months into a Chapter 13 repayment plan (with court approval). For conventional loans, the wait is typically 4 years after Chapter 7 and 2-4 years after Chapter 13. Some lenders may require longer waiting periods.
Can I get a mortgage with collections or charge-offs?
Yes. FHA loans don’t require you to pay off collections or charge-offs before closing (though some lenders have overlays requiring this). However, unpaid collections will factor into your debt-to-income ratio, and they’ll definitely affect your interest rate. Medical collections have less impact than credit card collections.
Should I pay off collections before applying?
Not necessarily. Paying off old collections can actually lower your credit score temporarily (by updating the “date last active”). If collections are more than 2-3 years old, it may be better to leave them unpaid. For recent collections, paying them off can help. Consult with your loan officer before taking action.
What’s the difference between pre-qualification and pre-approval?
Pre-qualification is a quick estimate based on information you provide—no verification. Pre-approval is much stronger—it involves a credit check, income verification, and a conditional commitment from the lender. Sellers take pre-approvals seriously; pre-qualifications carry little weight.
Can I buy a house with no credit score at all?
Yes, through manual underwriting. If you have no credit score, FHA lenders can evaluate your payment history for rent, utilities, insurance, and other regular bills. You’ll need 12+ months of documented on-time payments for at least 3 different accounts. This process takes longer and is more document-intensive.
Next Steps: Getting Started Today
Now that you know which lenders work with bad credit borrowers, here’s your action plan:
Step 1: Check Your Credit Reports
Get free copies of your credit reports from all three bureaus at AnnualCreditReport.com. Review them carefully for errors and dispute any inaccuracies you find. This alone could boost your score 20-30 points.
Step 2: Get Pre-Qualified with 3-5 Lenders
Contact at least 3-5 lenders from this list. Many offer free pre-qualification with no impact to your credit score. Compare their offers, minimum requirements, and interest rates.
Step 3: Gather Your Documents
Start collecting the required documents listed earlier in this guide. Having everything ready will speed up the approval process once you formally apply.
Step 4: Consider a HUD-Approved Housing Counselor
These free counselors can help you understand your options, create a budget, and navigate the mortgage process. Find one at HUD.gov. Many down payment assistance programs require counseling completion anyway.
Step 5: Start Shopping for Homes
Once you have a pre-approval letter in hand, you can start shopping confidently. Work with a real estate agent experienced with first-time buyers or those using FHA loans.
Final Thoughts
Getting a mortgage with bad credit in 2025 is challenging but absolutely possible. The key is working with the right lenders, understanding your options, and being prepared with all necessary documentation.
The seven lenders featured in this guide—Rocket Mortgage, Carrington Mortgage, New American Funding, Guild Mortgage, CrossCountry Mortgage, Freedom Mortgage, and Veterans United—all have proven track records of helping borrowers with credit scores under 620 achieve homeownership.
Yes, you’ll pay higher interest rates than someone with perfect credit. Yes, the approval process will be more thorough. But none of that changes the fact that bad credit doesn’t have to mean the end of your homeownership dreams.
Start by checking your credit reports, contacting lenders from this list, and taking concrete steps to improve your financial position. Every positive action you take—paying bills on time, reducing debt, saving for a larger down payment—moves you closer to the goal of owning your own home.
Remember: Millions of Americans with imperfect credit become homeowners every year. With preparation, persistence, and the right lender, you can be one of them.
Hi, I’m Faheem, the creator and author behind Icis. I’m passionate about technology and automobiles, and I love sharing what I learn with others who have the same enthusiasm. Through this blog, I aim to make complex tech and auto topics simple and easy to understand. I personally research and write every article to ensure it’s useful, accurate, and interesting for my readers. Thanks for visiting—I hope you enjoy exploring Icis as much as I enjoy building it!