In some cases, it doesn’t matter if your FICO score isn’t as high as the Jones’. You don’t always need a 720 or higher credit score to become a homeowner or settle for a fly-by-night mortgage lender.
Still, not everyone will be eligible and your interest rate will be higher than that of a “prime” mortgage borrower. Because of this, we suggest you take your time and shop around. Look for the best interest rate, fees, and customer service.
Bad Credit Mortgage Lenders
Some of the best lenders work with clients whose credit ratings are close or below 600. Here are a few suggestions:
Freedom Mortgage
Although Freedom Mortgage specializes in loans for veterans and service members, it also provides a wide range of other mortgage products. Some consumers with credit scores as low as 540 may be eligible for FHA loans through Freedom Mortgage.
Here’s what else you should know:
- Rates are generally competitive, while average loan fees are slightly higher than those offered by some of the other lenders on our list.
- Traditional, individualized approaches mean more face-to-face or phone interactions. There isn’t much of an online presence.
- FM considers non-traditional credit histories. So, if you have a limited credit history, it may include on-time payments for items such as rent, utilities, and so on, which do not generally appear on credit reports.
If you’re a veteran or military member looking for a VA loan, you should call them.
Navy Federal Credit Union
Navy Federal Credit Union (NFCU) is an exceptional option as a mortgage lender. Why? Well, it is a credit union, and only members are eligible for loans.
Navy Federal memberships are only available to veterans, service members, and individuals with intimate ties to the military. As a result, it specializes in VA loans. Navy Federal Credit Union provides the following benefits to people who are eligible for membership:
- They have excellent online services, including an app so you can track the status of your loan application.
- The average mortgage rates and costs for fees are the lowest. This low cost is partly because its focus is on VA loans, which have lower interest rates.
- There are no FHA or USDA loans available. If you are not eligible for a VA loan, you may need to hunt for another option.
- There is no minimum credit score. According to Navy Federal, “a member’s approval is determined by multiple variables, not just one number.” This statement implies that it will likely consider lower scores with compensating elements and non-traditional credit histories.
If you’re eligible for membership and a VA loan, you’ll want Navy Federal on your shortlist.
New American Funding
New American Funding (NAF) examines each mortgage application on its own merits. That means NAF can sometimes be more sympathetic to those who’ve had financial problems in the past. Additionally, NAF offers:
- Competitive mortgage rates
- An A+ rating with the Better Business Bureau (BBB)
- Strong customer reviews and very few complaints
- A bilingual call center with English and Spanish
- Flexible customer service: in-branch, online, by phone, or any combination
- A wide range of types of mortgages, including FHA loans with a minimum credit score requirement of 580
- Fast turnaround. NAF loans close in 14 business days… period (this excludes refinances)
- A constructive approach to down payment assistance programs
The only big drawback to dealing with a mortgage lender such as New American Funding is they do not have a license to operate in New York state or Hawaii. But if you live in any of the other 48 states, this lender is likely worth consideration for a bad credit home loan.