How To Get Bad Credit Mortgage Loans With Guaranteed Approval?

Your Credit score plays a significant role in your life as a consumer. Insurance, work, utility services, and loans can all depend on your credit rating. Nevertheless, the issue of inadequate or poor credit should not be an obstacle to owning a house. There are established lenders ready to assist individuals with low credit scores.

On an 850-point scale, nearly 15% of Americans have credit scores ‘’between’’ 500 to 599. According to FICO Scores standards, this is regarded as poor credit. So even if your score is less than perfect, no need to worry; you are not alone. Just like any other home buyer, go ahead and look around for a suitable lender.

What is Bad Credit?

There is no minimum credit score that will disqualify you from acquiring a mortgage. Different mortgage lenders try as much as they can to cover everyone regardless of their credit score. Besides, all the conventional mortgage lenders have the freedom to set up the minimum credit score for each of their products. It is upon individual lenders to reasonably decide what score they will use.

However, it’s a hard sell despite all this flexibility if your credit is too low, difficult but not impossible to get a willing lender. Lenders believe that applicants with low credit have a high chance of defaulting on repayment. For example, if your credit score is less than 500, focus on getting higher. Acquiring a mortgage with such a score will be an uphill task.

Types Of Bad Credit Mortgages

Whereas some lenders may offer conventional loans to people with bad credit scores, they tend to inflate the interest rates. Therefore, to get more affordable financing, you can turn to government insured poor credit mortgages. Besides relax credit limits, these mortgages also need a lower down payment compared to many conventional mortgages.

If you want a bad credit mortgage loan backed by the government, there are three options available;

1. USDA Loans

USDA loans are split into two categories. Section 502 Direct loans go directly to pay for homes. These loans are meant for low-income earners who want to purchase properties in rural areas.

USDA also advances loans to low-income people. The limits are also high since the loans are from private lenders. The good thing is, you don’t need to make any down payment to get these loans. And their interest rates are always way below those charged by the conventional lenders. Also, you can get a loan even if you have imperfect credit. Examples of lenders in this category include;

  • AmeriSave Mortgage Corporation
  • SunTrust
  • Fairway

2. FHA Loans

These loans are also backed by the Federal Housing Administration and advanced by private lenders. However, to qualify you must have a credit score of at least 580. You’ll also be required to make a 3.5% down payment. If your credit score is less than 580, you can secure a loan with a higher down payment of 10%. Even though there are no set minimum income requirements, the issuers must interrogate your ability to pay the loan. Some of the best FHA lenders include;

  • Rocket Mortgage
  • CitiMortgage
  • PNC Bank Mortgage

3. VA Loans

These are Veteran Administration guaranteed loans. Although, the loans are also from private lenders. The VA doesn’t impose any minimum credit score on their prospective customers. You also don’t need a down payment as long as the home doesn’t appraise for less than its value.

However, VA loans are only meant for service persons. Although, those with military service can also qualify. Also, the surviving spouses are legible as well. If you are interested in these loans, below are some of the top lenders you can go to;

  • Veterans United
  • New American Funding
  • Navy Federal Credit Union Mortgage
  • PNC Bank Mortgage

For you to qualify, you must pass the following requirements:

  • Must have been in the National Guards for not less than 6 years
  • Must have been in service for 181 days consecutively during peacetime
  • Served 90 days successively during service in times of war
  • The spouse of a service member who perished in the course of duty
  • A credit score of not below 640

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The 5 Best Bad Credit Mortgage Loans Providers

  1. Caliber Home Loans
  2. Loan Depot
  3. New American Funding
  4. Navy Federal
  5. Rocket Mortgage

With a FICO score of less than 600, there are plenty of lenders willing to help you secure a home mortgage loan. The only downside here is that your interest rate will probably be higher than a person with good ratings. Below are some of the top mortgage lenders willing to work with borrowers with low credit scores.

1. Caliber Home Loans

Caliber Home Loans is a Texas-based company that is one of America’s biggest lenders. They have a broad range of mortgages you can choose from. To acquire a mortgage from them, your credit score must be at least 580. Otherwise, it may be hard to secure your desired mortgage loan amount. 


  • A Minimum credit score of 580
  • Great reviews by customers
  • Wide range of mortgage packages
  • Present in all the 50 states

2. Loan Depot

Founded in 2010, Loan Depot has expanded to be the fourth-largest mortgage originator in America.


  • Minimum credit score 580
  • Efficient and fast loan processing 
  • Competitive rates
  • Wide loan portfolio

3. New American Funding

New American Funding is the go-to lender for borrowers with a bad credit score. Each application is graded on its own merit. This makes the lender a bit more sympathetic to borrowers with prior financial challenges.


  • Average competitive rates
  • Minimum credit score 580
  • Fast turnaround, within 14 days

4. Navy Federal

Navy Federal is a credit union whose membership is restricted. Membership is limited to only service members, veterans, and those with close connections with the military.

For those who qualify for membership, this is one of the best lenders you will get.


  • There is no minimum credit score. Loan approval process factors in non-traditional credit histories
  • Lowest mean loan rates and fees

5. Rocket Mortgage

Rocket Mortgage is a customer darling. By loan volume, this is one of the leading American biggest mortgage lenders. Their services are available across all 50 states. Additionally, Rocket has got a wide range of loan terms and products that you may consider.


  • It has a robust customer care thus customer satisfaction.
  • You can evade the original fee charged
  • Their loan terms are customizable
  • You can do all the transactions online

How to Improve Your Credit Score Fast?

  • On-time payments: Making payments on time boosts credit scores. Your repayment history is vital in determining your credit score. Make it a habit of paying all your due loans within 29 days. Otherwise, loans that are 30 days late will negatively impact your credit rating.
  • Have All Your Accounts Current: Ensure that all your credit accounts are up to date; this is good for your overall credit score. Late payments will hurt you as they can stay in your credit report for up to seven years. This will also be a good way of avoiding needless additional late fees for late-payments
  • Don’t Close Your Credit Cards: Take care when it comes to closing your credit card accounts. Closing your account means you have automatically lowered your available credit and reduced your power to borrow. In the long run, damaging your credit utilization ratio
  • Revolving Account Balances: Credit utilization rate is a key in gauging your credit score. Paying your revolving debt will increase your score by lowering the utilization rate.
  • Have a Budget and Make It Work: Create a budget that will help you track expenses and income. Avoid piling debts by knowing how much you spend and where you spend it. Start saving small. Eventually, it will add up to something.
  • Build Your Credit File: Having several open and active accounts will help build your credit file. Several accounts in your name will give the impression of a good borrower. That’s exactly what lenders want to see
  • Credit Boosting-Programs: Take advantage of boost programs by Ultra FICO and Experian. These programs monitor the movement of money in your account and thus boosting your credit score. Many banks offer their customers credit monitoring. Understanding your credit score will assist you in improving it.
  • Mix Different Credits: Lenders are interested in the way you have used various types of debts, including credit cards and other revolving debts. You have tried several lenders, but no success yet. You have not managed to secure a home mortgage loan because of your bad credit and lack of funds to pay the deposit; other avenues are still open.

Buying a House With Bad Credit and No Money down

It is possible to purchase a home with nil down payment, a transaction known as a zero-down mortgage. This type of mortgage you can only get if you take a government-backed loan.

Currently, there are two types of government-sponsored home loans a buyer can get with no deposit paid, VA loans and USDA loans. For you to qualify, you must meet the laid down requirements. Each loan has its specific criteria. Examples of these are VA, USDA and FHA.

Other Options for Low Money down Mortgage

Even if you don’t qualify for the popular loans, there are still options out there for mortgages with little down payment.

Freddie Mac Home Possible Loan

Home Possible loan allows you to buy a home with a down payment of 3%. The key stipulation is that your median income cannot be more than 100% of your home area.

Down Payment Assistance Programs

Even if you miss all the above loans, several local and state home buyer programs are running. The programs aid with down payment plus closing costs.

Frequently Asked Questions (FAQ)

What mortgage lenders will work with bad credit?

There are multiple bad credit mortgage lenders in the market. There are those backed and regulated by the Federal Bank. Others are owned and operated by independent private people. Examples of bad credit mortgage lenders include;

  • New American Funding
  • Caliber
  • New American Funding
  • Navy Federal Credit Union Services
  • Rocket Mortgage

Can I get a home loan with a 500-credit score?

Yes. There are several mortgage lenders who consider people even with the poorest credit scores. Some will give a minimum credit score and others never. So, yes with a 500-credit you can secure a home loan.

What is the lowest credit score to buy a house?

In most cases, mortgage lenders consider credit scores between 500 and 580. Although, there are others that never consider your score. All they’ll look at is your ability to pay the loan.

How can I quickly raise my credit score?

There are several ways a person can raise their credit score. Examples of these include;

  • Making your payments on time
  • Keeping your accounts updated
  • Revolving Account Balances
  • Have a Budget and Make It Work:
  • Build Your Credit File
  • Credit Boosting-Programs:

How can I buy a house with bad credit and no money down?

The only way to build a home with bad credit without incurring huge interest charges is going for government backed loans. Most of these loans don’t ask for down payments and their interest rates are low. 


Before you purchase a home, it’s important to note that most lenders prefer borrowers who can pay a deposit of 20% and a FICO score of above 670. But if you have poor credit of 500, it’s still possible to get an FHA loan. With a score of less than 500, the only viable alternative is to raise your credit score.

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