ElitePersonalFinance found the Best Mortgage Rates and Lenders for Bad Credit of December 2025

If you’re looking to take out a mortgage with bad credit, don’t lose hope. Is the process going to be challenging? It is not difficult to partner with banks, credit unions, and online lenders that offer popular programs with competitive rates and flexible terms.

Whether it’s a government-backed FHA loan or non-traditional scoring programs that consider your rental history and utility payments instead of your credit score, the best mortgage rates for bad credit should be accessible to everyone.

Why Should You Trust ElitePersonalFinance?

For years, with help from hundreds of thousands of readers with bad credit, they have understood how to navigate the mortgage process. Our mission is to make it easier for anyone with bad credit to have confidence in affordable homeownership.

Keep reading and let ElitePersonalFinance walk you through today’s best mortgage rates for bad credit, along with a full breakdown of our top recommendations, inside tips on how to apply for a mortgage with bad credit, and how much you can expect to dish out.

From improving your credit score to choosing the right programs, we will guide you every step of the way so you can work towards owning your dream property.

SuperMoney

Looking for a mortgage marketplace and have credit scores in the 620 range? If so, SuperMoney is ready to step up to the plate, providing access to a wide range of lenders offering competitive rates on all types of mortgages, including conventional, FHA, and VA loans.

Note: SuperMoney is not a direct lender but a comparison website that lets you compare multiple mortgage offers in one shot, with side-by-side views of interest rates, APRs, fees, and more. Plus, browsing offers does not trigger hard credit inquiries. Through the website, there’s no shortage of lenders accepting credit scores as low as 580 (depending on the type of loan).

In addition, SuperMoney offers detailed analysis of each lender, complete with key takeaways, pros, cons, and full reviews written by expert authors who know the ins and outs of each program.

What We Like:

• Ability to compare mortgage offers matching the credit profile
• Lenders accept credit scores as low as 580
• No hard inquiry needed
• Extensive resources, e.g., helpful articles
• Apply for preapproval with selected lenders

What We Don’t Like:

• Not a direct lender
• Higher-than-average interest rates for bad credit
• Larger down payments are required for low credit scores
• Rates and terms vary by lender

Eligibility & Next Steps:

• 18 years of age or older
• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statements
• Apply online through the SuperMoney portal to view offers

Terms: SuperMoney is a comparison marketplace that lets borrowers with bad credit compare offers from banks, credit unions, and online lenders in one place. SuperMoney is not a direct lender and cannot guarantee approval. Actual loan terms, rates, and eligibility depend on the individual lender’s requirements, your credit score, income, debt-to-income ratio, and type of loan. Borrowers with bad credit should review multiple offers and confirm all fees before applying. Always read your official loan estimate before signing the contract.

Wells Fargo

Arguably a top-three bank in the country, Wells Fargo serves bad-credit borrowers with several mortgage programs, including conventional, FHA, VA, USDA, and refinancing. FHA loans are available to borrowers with scores around 640, which is stricter than the minimum scores of our other recommended lenders.

Plus, we highly appreciate Wells Fargo’s online tools, which let you do everything from checking your debt-to-income ratio to understanding how it affects your qualification. Plus, it accepts non-traditional credit references based on your financial situation and offers programs like Homebuyer Access, which make you eligible for closing cost credit in eligible regions.

Although Wells Fargo may not be our first choice for low-credit-score approval, its diverse mix of loan products, FHA availability, and national reach make it an excellent choice for borrowers looking to take on a mortgage.

What We Like:

• Widely recognized bank
• Variety of loan programs (e.g., conventional, FHA, VA, USDA, refinance)
• May accept alternative/non-traditional credit history, depending on the program
• Homebuyer Access for closing cost credits
• Helpful online tools

What We Don’t Like:

• Customer service quality varies by region
• Slower underwriting than digital lenders
• FHA minimum score (640) is higher than that of competitors
• Limited promotional rates

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Wells Fargo portal

Terms: Wells Fargo is a direct mortgage lender offering traditional, FHA, and VA loans, including programs designed for borrowers with less-than-perfect credit. Rates, terms, and approval depend on verified credit history, income, debt, and property details. Borrowers with bad credit may face higher rates or down payment requirements. Programs and rates are subject to change without notice, and additional costs such as mortgage insurance or closing fees may apply. Always read your official loan estimate before signing the contract.

Bank of America

One of the largest banks in the United States, Bank of America, offers several mortgage types, including conventional, FHA, VA, and jumbo loans. However, borrowers will benefit from the FHA loan program, which requires a minimum credit score of 580 and down payments as low as 3.5%.

On top of that, Bank of America is known for its Community Affordable Loan Solution program for select borrowers, which applies alternative eligibility criteria, such as on-time rent and utility payments, instead of credit scores, to determine eligibility. Benefits to Community Affordable Loan Solution include, but are not limited to, zero down payment, zero closing costs, and first-time homebuyer status in select neighborhoods across several counties, subject to completion of a homebuyer certification course from a HUD-approved counseling agency.

All in all, Bank of America hits the mark when it comes to mortgage program variability and its Community Affordable Loan Solution program for borrowers with lower credit scores.

What We Like:

• Widely recognized name
• Variety of mortgage types, e.g., conventional, FHA, VA, and jumbo loans
• Extensive resource sections on the website
• No minimum required credit score with Community Affordable Loan Solution

What We Don’t Like:

• Origination fees on select loans
• Limited branch availability in certain regions
• Higher-than-average interest rates
• Mortgage insurance is required for the Community Affordable Loan Solution

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Bank of America portal

Terms: Bank of America provides multiple mortgage options, including Community Affordable Loan programs, which may assist borrowers with bad or limited credit history. Eligibility depends on your verified financial situation, including income, credit score, and type of property. Rates and programs can change at any time, and you may have to pay additional costs such as mortgage insurance. Borrowers should confirm qualification requirements before applying. Always read your official loan estimate before signing the contract.

New American Funding

New American Funding is a direct mortgage lender that offers several mortgage products, including conventional, FHA, VA, USDA, and jumbo loans. It’s well known for its flexible FHA and VA loan programs, which allow borrowers to secure financing with lower-than-average credit scores and debt-to-income ratios as high as 57% (a nice option over traditional loans, which cap DTI at 45%).

To qualify for FHA loans through New American Funding, you need a credit score of at least 580, a down payment ranging from 3.5% to 10%, mortgage insurance premiums with an upfront payment of 1.75% of the loan amount, and strict employment verification protocols with incremental increases. On top of that, people without housing must be considered for primary residence loans with higher home inspection standards than traditional loans.

Other options include low down payments, closing cost assistance, and a wealth of resources to help first-time homebuyers navigate the process.

In short, New American Funding is an excellent choice for first-time homebuyers through FHA/VA loan programs, as well as borrowers with bad credit.

What We Like:

• Variety of mortgage types are available
• FHA loans available to 500+ credit score borrowers
• 3.5% down payment for 580+ scorers / 10% for 500–579 scorers
• No private mortgage insurance requirement with VA loans
• No down payment on USDA loans for select properties

What We Don’t Like:

• Mortgage insurance is required for FHA loans
• Limited branch availability
• Not the most consistent customer service
• 10% down payment for scores below 580
• Stricter underwriting depending on the region

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the New American Funding portal

Terms: New American Funding is a direct mortgage lender known for flexible FHA and VA programs that cater to borrowers with bad credit or higher debt-to-income ratios. Final approval and loan terms depend on verified income, assets, credit score, and the value of your property. Additional fees, including mortgage insurance, may apply. Borrowers should review all disclosures and rate details carefully. Always read your official loan estimate before signing the contract.

Guild Mortgage

Guild Mortgage is the top all-around performer, offering a variety of mortgage products for borrowers with bad credit. It provides an extensive FHA loan program that accepts credit scores as low as 540 and requires a 3.5% down payment (though those with a credit score between 540 and 579 will need a 10% down payment), making it an excellent deal for first-time home buyers.

On top of that, Guild Mortgage also offers a Complete Rate Program, which allows anyone without a traditional credit score to qualify for a mortgage using other criteria, such as a history of on-time rent and utility payments. Plus, a Zero Down program is available for borrowers with credit scores of 600 or higher, just as long as you combine a second mortgage with an FHA mortgage.

With its flexible credit requirements and variety of loan programs, including FHA, VA, and USDA, along with down payment assistance, Guild Mortgage is an excellent option for the best mortgage rates for bad credit.

What We Like:

• Accepts scores as low as 540
• Complete Rate Program uses alternative qualifying criteria
• Diverse loan options, e.g., FHA, VA, USDA, and conventional
• Experienced dedicated loan officers
• Down payment assistance & partner programs available

What We Don’t Like:

• Not available in all states
• Minimum credit score of 600 for the Zero Down Program
• Not the most robust digital platform
• Higher rates for sub-580 credit

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Guild Mortgage portal

Terms: Guild Mortgage is a direct lender offering FHA, VA, and USDA programs that may accept lower credit scores and non-traditional credit data. Borrowers with bad credit can benefit from flexible underwriting criteria, but should expect higher down payment or documentation requirements. Loan rates, fees, and availability may vary by state of residence. All loans are subject to credit and property value. Always read your official loan estimate before signing the contract.

Rocket Mortgage

One of our favorite mortgage rates for bad credit providers, Rocket Mortgage is a standout performer with its diverse FHA loan offerings, with credit score requirements as low as 580. Plus, you can put down as little as 3.5%. As of October 2025, Rocket Mortgage is offering a 5.75% 30-year FHA loan rate, which is below the 6.3% national average.

On top of that, Rocket Mortgage offers an intuitive online dashboard with real-time loan tracking, along with a comprehensive set of guides and tools to assist first-time borrowers and seasoned veterans throughout the mortgage process.

What We Like:

• Variety of loan programs, e.g., FHA, VA, and conventional loans
• FHA accepts scores as low as 580
• 30-year FHA loan rate below the national average
• Easy-to-use online dashboard
• Excellent resources on the site

What We Don’t Like:

• Higher than average origination fees
• Limited in-person service
• Slower manual verifications depending on the borrower
• Fewer flexible credit exceptions than credit unions

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Rocket Mortgage portal

Terms: Rocket Mortgage is an online lender that offers FHA and VA loans which are good for borrowers with bad credit, typically starting at a minimum 580 score. Approval and rates depend on verified income, debt, property type, type of loan, and loan size. Rates and fees can change without notice and vary based on borrower qualifications. Mortgage insurance or additional costs may apply for low-credit or low-down-payment applicants. Always read your official loan estimate before signing the contract.

Old National Bank

If you’re looking for a highly reputable legacy bank, then Old National Bank is a solid choice. It offers people with less-than-perfect credit conventional loans, which require only a 3.5% down payment.

One of Old National Bank’s strongest attributes is its Credit Builder Mortgage Program, which allows borrowers to qualify based on non-traditional credit scores, unlike the alternative approach, which involves timely rental and utility payments. If you have difficulty paying off your credit cards but are on track with your monthly utility payments, this is an appealing option.

On top of that, we also appreciate Old National Bank’s rate incentives if you have an eligible checking or savings account. Even automatic payments can qualify you for closing cost discounts. Plus, it offers strong in-person customer service with dedicated loan advisors who understand the ins and outs of working with credit-challenged borrowers.

What We Like:

• Credit Builder Mortgage Program for non-traditional credit scoring
• Offers FHA, VA, and conventional loans
• FHA score requirement as low as 580
• Existing customers enjoy rate and closing cost discounts
• Personalized guidance by dedicated loan officers

What We Don’t Like:

• Not available in all states
• Not the most robust online prequalification tools
• Little jumbo loan options
• Slower approval process for non-Old National Bank customers

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Old National Bank portal

Terms: Old National Bank offers traditional and government-backed mortgage programs designed to assist borrowers with bad credit through flexible qualification options. Final loan approval depends on verified income, debt, and property value. Rates, programs, and incentives may vary by state or account relationship. Borrowers should confirm eligibility requirements and fees before applying. Always read your official loan estimate before signing the contract.

Better.com

One highly recommended online mortgage lender is Better.com, which offers excellent programs for borrowers with less-than-stellar credit. In addition to conventional and VA loans, FHA loans are available with credit scores as low as 500.

Another benefit of using Better.com is its entirely online process, which reduces the associated risks with in-person banking at legacy banks, such as Chase or Wells Fargo. Plus, transparent fees help avoid hidden costs with fast loan processing and preapproval. Note: not all loan types are represented. USDA loans are available, but the platform is not available in all states because it lacks physical branches.

In terms of awards, Better.com has accumulated numerous accolades over the years, including being a finalist for the 2025 Finovate Awards in the Best Consumer Lending Solution category and Inman’s 2025 Innovator Award.

All in all, Better.com is an excellent place to start your mortgage journey—from preapproval to closing—with real-time updates and dedicated loan officers on staff to assist at every step of the process.

What We Like:

• FHA loans accept credit scores as low as 500
• Fully digital process from preapproval to closing
• Finalist for the 2025 Finovate Awards in the Best Consumer Lending Solution category
• 2025 Fintech Breakthrough Awards for Digital Mortgage Innovation

What We Don’t Like:

• Not available in all states
• No physical branches for in-person support
• Rates fluctuate faster than banks
• Limited product variety (e.g., no USDA loans)

Eligibility & Next Steps:

• 18 years of age or older
• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statements
• Apply online through Better.com

Terms: Better.com is an online mortgage lender offering conventional and FHA loans that may accommodate borrowers with bad credit, depending on the loan program. Loan approval depends on verified income, credit score, and property value. Rates and terms can change based on market conditions, and additional fees or insurance may apply. Borrowers are encouraged to compare offers before locking a rate. Always read your official loan estimate before signing the contract.

Veterans United Home Loans

America’s number one VA lender, Veterans United Home Loans, is a workhorse, offering VA loans with programs like 0% down payment, no private mortgage insurance required, and competitive interest rates compared to FHA, USDA, and traditional loans, with minimum score requirements as low as 620.

As for awards, Veterans United Home Loans has several, including 2025 Bankrate Best Lender for VA Loans, 2025 Fortune 100 Best Companies to Work For, and 2025 PEOPLE Companies That Care, all testament to its transparency and respect for the needs of retired and active military duty personnel looking to purchase their first, second, or third home.

One of the best things about Veterans United Home Loans is its highly intuitive app, myVeteransUnited, which lets you get updates on your loan progress, upload and sign documents electronically, and manage all your payments. Plus, it even offers a credit score tracker. The resource section also includes expert articles on topics ranging from “Selling a House with a VA Mortgage” to “How to Get a Second VA Loan.”

In short, Veterans United Home Loans is an excellent choice if you’re a veteran with bad credit who would appreciate a fully digital application process, competitive interest rates, and exceptional 24/7 customer support.

What We Like:

• Specializes in VA loans
• User-friendly digital platform
• No PMI and 0% down payment options available
• Lower than average interest rates compared to the national average

What We Don’t Like:

• No traditional or FHA loan products
• No physical branches for in-person support
• Limited to retired and active military duty personnel
• Military status and region determine rates

Eligibility & Next Steps:

• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statement
• Apply online through the Veterans United Home Loans portal

Terms: Veterans United Home Loans is a VA-focused lender offering programs tailored to veterans and active-duty members, including those with bad credit. Eligibility, rates, and loan terms depend on verified military status, income, and credit profile. VA loans typically require no down payment but may include funding fees or insurance costs. Borrowers should verify all program conditions before applying. Always read your official loan estimate before signing the contract.

loanDepot

If you have less-than-perfect credit, then loanDepot is an excellent choice. It offers several government-backed FHA loans with a minimum credit score requirement of 580, allowing borrowers to put a 3.5% down payment on their homes, versus a 10% down payment for borrowers with credit scores between 500 and 579.

In addition, loanDepot offers VA loans exclusively to veterans and active-duty service members, who can take advantage of no down payment and no private mortgage insurance. Other mortgage options include conventional and jumbo loans with terms of 15 years and 30 years.

loanDepot’s combination of low credit score requirements, competitive rates, no problem mortgage insurance on VA loans, and a streamlined application process makes it one of the best mortgage options for bad credit.

What We Like:

• Variety of mortgage programs: FHA, VA, conventional, and jumbo loans
• Straightforward and streamlined application process
• FHA loans are available with a 580 credit score requirement
• No private mortgage insurance on VA loans
• Competitive rates on government-backed loans

What We Don’t Like:

• Higher interest rates for borrowers with a bad credit score
• Origination fees exist on some products
• Limited branch availability
• Not the most consistent customer service

Eligibility & Next Steps:

• 18 years of age or older
• US citizen or permanent resident
• Valid Social Security number
• Proof of income and employment history
• Preapproval documents, e.g., credit score and bank statements
• Apply online through the loanDepot website

Terms: loanDepot is a direct mortgage lender that offers FHA, VA, and conventional loan programs for borrowers with bad credit or limited credit history. Approval depends on verified financial details, credit score, and property value. Rates, terms, and availability can vary by program and market conditions. Additional fees such as mortgage insurance or closing costs may apply. Borrowers should review all lender disclosures carefully. Always read your official loan estimate before signing the contract.

Can You Get a Mortgage with Bad Credit?

Yes, it is possible to get a mortgage with bad credit.

One of the easiest ways to do it is by taking out an FHA loan. Backed by the Federal Housing Administration, borrowers with a credit score as low as 580 can qualify with only a 3.5% down payment (versus 10% for borrowers with 500 to 579 scores).

One of the best things about FHA Loans is that debt-to-income ratios are relaxed. However, you will have to pay mortgage insurance premiums if you don’t put down at least 20%.

Another option for borrowers with bad credit seeking a mortgage is a VA loan. Exclusively for veterans or active-duty service members, VA loans have no official minimum credit score (though you should expect to be in the 580-620 range). Another excellent option is USDA loans for Rural and Suburban properties, which offer up to 100% financing with less stringent requirements than traditional loans.

Fortunately, many of our recommended lenders, such as Guild Mortgage, Wells Fargo, and Old National Bank, are available to assist borrowers with bad credit in Decatur. Plus, many of them even allow you to use non-traditional credit data, such as on-time rent and utility bill payments, to substitute for actual credit scoring.

Plus, there’s always a risk of subprime or non-qualified mortgages (non-QM), which generally come with higher interest rates.

To improve your chances of getting the best mortgage rates with bad credit, we recommend increasing your down payment, paying down as much debt as possible, getting pre-approved with multiple lenders, and demonstrating a solid savings history.

In short, it is possible to buy a home with bad credit, but you’ll probably have to rely on government-backed loans and credit programs that can help you get there. Try to raise your score as much as possible by following our How to Improve Your Credit Score to maximize your chances of saving thousands in interest and fees.

What Credit Score Do You Need to Buy a House?

When it comes to buying a home, a credit score means everything. The higher your credit score, the more favorably lenders view you, which means you’ll secure lower interest rates and more flexible terms.

As for minimum credit scores, it all depends on the loan type. For example, you need a credit score of at least 620 for traditional mortgages backed by Fannie Mae or Freddie Mac. The threshold for qualifying for the best interest rates and waived or low-cost private mortgage insurance is 740.

If your score is below 620, you will need to offset it with a higher down payment or income.

In turn, the Federal Housing Administration-backed FHA Loans allow low-credit borrowers to qualify with as low as a 580 credit score, as long as you can put a 3.5% down payment. If your credit score is between $500 and $579, you’ll be required to make a down payment of at least 10%.

Active-duty military personnel, retirees, and their families can benefit from VA loans, which do not require a minimum credit score. However, va-friendly lenders do require a credit score of at least 620. However, perks are numerous, such as no required down payment or private mortgage insurance, which can help you save thousands over the life of the loan.

Lastly, USDA loans are available to people living in suburban and rural areas with moderate incomes, typically requiring a credit score of 640. Lowest scores may be accepted, but underwriting criteria are stricter, requiring, at a minimum, lower depth income ratios and consistent income.

All in all, there’s no shortage of opportunities for people with bad credit to secure a mortgage, depending on the loan type, down payment, and other factors.

Will The Interest Rates Go Down in 2025?

According to the latest opinions by economic analysts, the types of changes, expected to continue through 2025 and beyond. However, many factors go into determining interest rates, such as economic growth and employment trends. If you’re a borrower with bad credit, don’t expect to benefit immediately from many favorable changes and rate policies, as tighter underwriting will continue. Our best advice is to lock in the rate as soon as you’re comfortable with it.

When you combine the right loan program with thoughtful preparation, buying a home with bad credit may not be so hard. Narrowing down your options using one of our recommended lenders, running a full APR check, and locking in the rate you’re comfortable with. Plus, with positive habits such as automating payments on time and keeping your revolving balances down, there’s always the opportunity to refinance once your score improves.

All in all, taking the best mortgage rates for bad credit does not have to be a daunting affair. Although your interest rate and total loan cost may be higher than average, there are plenty of ways to compensate, such as putting out a larger down payment, fixing your credit score before approval, and seeking government-backed programs that offer leniency on down payments, waived or minimized private mortgage insurance, and much more.

How to Get a Mortgage with Bad Credit

Here’s a step-by-step guide on how to get a mortgage with bad credit:

Understanding Bad Credit and Qualification Criteria

The first step to getting a mortgage with bad credit is to understand what bad credit is in the first place. Any FICO score below 620 is considered harmful, making mortgage approval challenging. However, many lenders (including our type recommendations) believe not only in credit scores but also in consistent rent or utility payments.

Factors that contribute to a bad credit score include late payments, a high credit utilization ratio, and collection activity with past defaults. I understand how your credit report is compiled and how FICO scores are calculated; you’ll be best able to plan strategically for your next mortgage.

Look into Government-Backed Mortgages

It’s almost sure that you will not qualify for a traditional loan from Legacy Banks like Chase or Wells Fargo.

However, there are several government-backed mortgage programs designed for borrowers with bad credit, including FHA, VA, and USDA loans. Insured by the Federal Housing Administration, FHA allows you to get in the door with as little as a 3.5% down payment and as much as a 10% down payment, making it a worthwhile option for first-time home buyers.

Alternatively, veterans and active-duty military members can enjoy VA loans, which have similar criteria with no set minimum credit score, though the 580-620 range is preferred.

Lastly, suburban and Rural home buyers can take advantage of USDA loans with 100% financing and less strict credit requirements.

Save, Save, and Save

One of the most significant differences you can make with your mortgage is to secure a higher down payment. Try to aim anywhere between 10% and 20% of the home’s purchase price. If you hit 20%, you will not need to pay private mortgage insurance, which can add hundreds to your monthly bill.

For example, if you’re buying a $300,000 home and putting down $80,000, your loan-to-value ratio is 80%. This is an excellent sign for lenders that you’re less likely to fall behind on your payments and can secure better mortgage rates.

Get Preapproved by Multiple Lenders

Always be sure to compare at least three offers before signing a mortgage for bad credit. Remember that a single inquiry can count as multiple preapprovals within a 30-day time frame. Shopping around can easily save you thousands in interest and fees.

How to Improve Your Chances of Getting Approved with Bad Credit

Here’s a quick guide on how to improve your chances of getting approved for a mortgage with bad credit:

Leverage Government-Backed Refinance Programs

One of the best ways to secure a mortgage with bad credit is to use government-backed refinancing programs.

One option for doing so is the FHA Streamline Refinance program, which allows you to refinance existing FHA loans without the need for extensive income verification or a credit check. If your credit score has dropped since your initial loan approval, then this could be a viable option.

For active duty and retired military members, VA Interest Rate Reduction Refinance Loans (IRRRLs) perform a similar purpose, allowing you to secure lower interest rates or shorter terms even if you have so-so credit. Let’s not forget the USDA Streamlined Assist Refinance for Rural and Suburban properties, which come with simple requirements, such as no home appraisals.

Note that all of these programs focus more on your existing payment history than on your overall credit situation, making them a nice choice for anyone with bad credit.

Work With Bad Credit Friendly Lenders

A second way to improve your chances of getting approved with bad credit is by working with a lender that specializes in borrowers with less-than-perfect credit.

For example, Guild Mortgage does an excellent job of this with its flexible refinance programs and its acceptance of non-traditional credit data. Instead of providing us with an incorrect credit score, they evaluate your creditworthiness based on long-standing utility payments.

Another viable option, Old National Bank, offers easy-to-understand, personalized Loan reviews that provide insight into what you qualify for, along with competitive refinance options that do not rely solely on your credit score.

All in all, bad credit-friendly lenders are all about looking into your current financial situation over your past credit troubles.

Look Into Non-QM Refinance Options

Suppose you can demonstrate consistent income or substantial Equity in your home. If you fall under non-traditional underwriting standards, such as freelancers, you may qualify for a non-QM refinance option that allows you to qualify. Keep in mind that these are known higher interest rates and down payment requirements, but could be a viable option if you’re in a tight spot.

Home Equity Should be Strong

One of the best ways to improve your refinance terms is by building home equity. Equity is the difference between your property’s current market value and the outstanding balance due on your mortgage. The higher your equity, the lower your interest rates, and you do not need to have private mortgage insurance.

One of the best ways to build home equity is by making extra principal payments on your mortgage. For example, if you pay an additional $300 every month on a $300,000 mortgage with a 30-year term, you can save thousands of dollars over the life of the loan.

Plus, legacy Banks like Wells Fargo and Old National Bank offer better refinancing opportunities.

At the very least, you should increase your home value through several renovations, such as energy-efficient upgrades and a new roof. By raising your appraisal value, you’ll be eligible for better refinancing programs.

At the very least, you should maintain your property and pay all of your bills on time to grow Equity. Note, this is a long-term strategy, but one of the best ways to show lenders you are fiscally responsible.

Add a Co-Borrower with Excellent Credit

Another way you can improve your chances of getting approved with bad credit is by asking a co-borrower to sign on to your account.

Coborrowers help strengthen your application and offer enhanced refinancing opportunities. By sharing responsibility, the risk of default is less.

For example, if your score is 580 but your spouse or family member has a 780 credit score, lenders like Guild Mortgage or Better.com allow you to take advantage of this. It can mean the difference between securing an 8% rate and a 6.5% rate, which can easily translate into thousands of dollars saved over the life of the loan.

Understand, though, that both parties are responsible, so if one person misses out, both credit scores can be affected. Always make sure that your co-borrower team fully understands what they’re getting into before bringing them on board.

What are the Pros and Cons of Getting The Best Mortgage Rates for Bad Credit?

Here are the pros and cons of getting the best mortgage rates for bad credit:

Pros

You’re a Homeowner!

One of the most significant advantages of securing the best mortgage rates for bad credit is the opportunity to become a new homeowner. Now it’s never been easier to qualify for government-backed loans, such as FHA, VA, or USDA mortgages, which are available to applicants with credit scores as low as 500.

By reducing down payment barriers and using alternative underwriting standards (often based on non-traditional credit scores and criteria), lenders take a more holistic approach to qualifying borrowers even when FICO scores don’t meet the mark.

Can Rebuild Credit

Obtaining the best mortgage rates for bad credit is, in and of itself, a credit recovery tool. By making consistent on-time payments, you’ll be able to fix your 35% allocation to payment history. It keeps the FICO scoring standard, allowing you to take advantage of future refinancing opportunities.

Within a year or two, borrowers who start with a 560 score could see their score rise to the 700s, allowing them to refinance at a lower rate.

Government Backed Protections

Now, agencies like the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) are fully involved in implementing borrower protections for retired or active military personnel and first-time home buyers seeking relief from lender fees and high closing costs.

With this additional level of oversight, borrowers with bad credit do not have to fear predatory lending practices. Complete transparency into our loan process helps them increase confidence as they navigate the home-buying process.

Cons

Higher Interest Rates Compared to Prime Borrowers

Unfortunately, higher-than-average interest rates are the name of the game when it comes to the best mortgage rates for bad credit.

Thanks to the increased risk of proceeds by lenders, you can expect to pay 7.5% or higher, depending on the type of loan and lender, resulting in tens of thousands of dollars in extra interest over a 15-year or 30-year loan.

Note, it’s essential to consider refinancing once your credit score improves, as you may be able to handle a higher interest rate now, hoping for a lower one tomorrow.

Additional Fees

A second downside to the best Market rates for bad credit is the required upfront mortgage insurance premium payments. , raising the APR alone. Note, it’s always important to calculate the total cost of borrowing on a loan, including fees and closing expenses, not just the interest rate.

How Much You’ll Pay on a Mortgage with Bad Credit

Many factors go into determining how much you will pay on a mortgage with bad credit, including your credit score, loan type, and the size of your down payment.

As a general rule, you should expect to pay thousands of dollars more in interest over time. For example, a borrower with a 760 FICO score might get a 6.5% fixed rate on a 30-year loan, versus 7.75 to 8.5% for someone with a 620 score.

As a practical example, a 2% difference on a $300,000 mortgage could mean you’ll pay over $100,000 in extra interest over 30 years. When adding private mortgage insurance (kicking in when putting down less than 20%), costs can compound.

That’s why we highly recommend setting yourself up for success by making a larger down payment and shopping around multiple lenders. Try to aim for a mix of banks, credit unions, and online mortgage companies that each have their own underwriting criteria, including approving bad-credit borrowers using non-traditional scoring, such as on-time rent and utility bill payments.

Plus, there’s always the option of government-backed programs like FHA and USDA.

In the long run, you may pay more for a mortgage than you’d like, but you can minimize the impact with a thoughtful, well-considered plan.

How to Improve Your Credit Score

If you have bad credit, you should do everything possible to improve your credit score before taking out a mortgage.

Here are five Surefire strategies you can use to turn it around in no time:

Understand How Your Credit Score Is Calculated

Before you even begin, it’s essential to understand how your credit score is calculated. Understand that it falls into five main categories, each with a percentage: payment history (35%), credit utilization (30%), credit history length (15%), new credit (10%), and credit mix (10%).

When working with lenders like Freedom Mortgage, understand that a higher credit score affects your interest rate.

Pay Down High Interest Debt First

Not all credit cards and other lines of credit are considered equal. Try to pay down cards with the highest interest rates first to reduce total interest over time and improve your debt-to-income ratio.

For example, if you have a $7,000 credit card balance at 20% APR, paying off $5,000 can quickly improve your financial situation. Remember that lenders like Chase and Bank of America weigh total outstanding debt when deciding whether or not to extend loans to you. Plus, you can even take advantage of lower refinance rates at US Bank or Flagstar Bank.

Increase Credit Limits

To improve your deputization ratio, you may negotiate higher overall credit limits with your lenders. For example, if your current limit is $5,000 and you request a $5,000 increase, your utilization ratio will be lower as long as total spending remains the same.

Using the strategy, it’ll be much easier to qualify for FHA or conventional refinances at lower interest rates.

Consider Balance Transfer Credit Cards

One often-overlooked credit-scoring strategy is to use 0% APR balance-transfer credit cards to keep your high-interest debt in check and free up more cash for your mortgage. If you transfer a balance from a $5,000 credit card with a 292% APR to a 0% APR card, you can focus solely on paying off the principal, with no interest payments.

With lower monthly obligations, you improve your debt-to-income ratio and reinforce a positive history. Just be sure to read all of the terms and conditions for the 0% APR. The service only lasts up to 18 months with a three to five percent transfer fee.

If you’re primarily looking to refinance within the next year, this is an excellent strategy.

Keep Your Income Strong

One of the best ways to qualify for the best mortgage rates for bad credit is to demonstrate stable, well-documented income. Underwriters at Bank of America, Wells Fargo, and US Bank are constantly verifying that you have a consistent income. If you’re self-employed, make sure your deposits are consistent.

If you’re a W2 employee, then try to avoid changing jobs before applying for a mortgage or a mortgage refinance.

How We Picked These Lenders

Every borrower with less-than-perfect credit deserves a bank credit union or fintech/online lender that stands by them every step of the mortgage process.

Evaluating based on program variety, credit scoring friendliness, interest rates, fees/incentives, and customer support, here’s our rationale:

Attention to Credit Scoring

First and foremost, ElitePersonalFinance considers credit score-friendly banks, credit unions, and fintech/digital lenders. For FHA Loans, lenders accept scores as low as 500 to 580 versus 540 to 600 for specialized programs.

For example, New American Funding allows borrowers with a credit score of 680 or higher to qualify for a low-down payment loan program. loanDepot and Better.com also offer the FHA program.

Flexibility

In addition to credit score accessibility, we prioritize lenders that offer flexible solutions for low-credit borrowers. All must have a combination of government-backed FHA and VA loans, as well as specialized programs like USDA loans, such as Guild Mortgage’s Complete Rate Program, which evaluates borrowers based on non-traditional scoring, including on-time rental and utility payments.
Another example is the Community Affordable Loan Solution by Bank of America, which also considers non-traditional scoring criteria.

By emphasizing program variety, all of our lenders offer multiple options based on your desired loan type, financial situation, property value, and other qualifying factors.

Below National Average Rates

In our selection, we prioritize lenders that offer rates below the national average. For example, Rocket Mortgage provides a 5.75% 30-year FHA loan. In comparison, New American Funding assists individuals with debt-to-income ratios up to 57% in obtaining FHA and VA loans, helping them manage their monthly budgets.

Plus, we prioritize lenders that impose unnecessary penalties or charge inflated rates.

Fees, Incentives & Closing Cost Programs

Another key aspect of the best mortgage rates for bad credit is the number of waived fees, available incentives, and lower closing costs. Two of our recommended options, Bank of America and New American Funding, offer down payment waivers and zero closing costs to eligible Borrowers.

Ongoing Education

When it comes to the best mortgage rates for bad credit, we prioritize lenders who provide complete transparency in their loan terms, as borrowers with bad credit may find more restrictive terms difficult to understand. That’s why we highly recommend lenders like PNC Bank and Rocket Mortgage, which offer a robust Suite of online tools and loan calculators to help borrowers understand everything from loan-to-value ratios to mortgage eligibility requirements.

By focusing on borrower education, everyone is better off before signing.

Strong Recognition

One of the best ways to evaluate mortgage lenders (especially when dealing with lower credit scores) is to understand industry recognition and to gather firsthand feedback that shows they’re on top of their game.

For example, New American Funding has earned several performance awards, including the well-regarded Stevie® American Business Awards (three Golds, one Silver, and two Bronze). In turn, Guild Mortgage was also awarded the 2023 “Top Ten Performer” for mortgages by Experience.com, thanks to an overwhelming number of favorable reviews from its Borrowers.

Post-Approval Support

Another area where banks, credit unions, and fintech should emphasize is post-approval support and refinancing options.

For example, New American Funding offers a Pathway to Homeownership program that provides personalized refinance plans for members across every credit tier, as well as budgeting tools. At the same time, Guild Mortgage is known for its one-on-one coaching for Borrowers, as well as ongoing educational webinars that cover the mortgage or mortgage refinance process, especially for those with bad credit.

Let’s not forget about automatic rate monitoring and early refinance alerts. Better.com uses its proprietary technology to alert users when refinances could help save money. Not only are they visible before and during the application process, but also after support, once interest rates dip.

Lastly, streamline refinance options with reduced fees is the name of the game. For example, Bank of America offers loyalty discounts to eligible customers who already have deposit activity with the Bank, which can help reduce closing costs or lower refinance rates by a few percentage points. At the same time, New American Funding also allows past clients to refinance at a discount, providing Borrowers with an excellent opportunity to rebuild their credit in the interim.

Customer Support

Our recommended lenders offer exceptional customer support throughout the mortgage process.

Three of our pics — Better.com, Rocket Mortgage, and loanDepot — offer an entirely digital online experience, allowing you to track your loan progress from preapproval to closing. In turn, we also provide in-person options (e.g., Guild Mortgage, New American Funding, and Veterans United Home Loans) staffed by dedicated Loan officers who can sit with you at a table and offer personalized advice based on your financial situation.

At the same time, we have also included a comparison site, SuperMoney, which allows you to easily compare mortgage rates for bad credit across multiple lenders without a hard credit inquiry on your record.

Frequently Asked Questions

What is the easiest mortgage to get with bad credit?

The easiest mortgage to get with bad credit is an FHA loan, which allows credit scores as low as 500, depending on the down payment amount. Plus, since the government backs it, Borrowers can feel more comfortable. In second place are VA and USDA loans, assuming you are an ex or current military member or have an eligible rural-based property.

What is the average interest rate for a mortgage with bad credit?

As of this writing, the average mortgage rate for borrowers with a credit score of 620 or lower typically falls between 7% and 9%. Expect FHA and VA loans to have lower interest rates, while traditional loans carry higher interest rates. All rates are subject to change based on Federal Reserve activity and overall economic conditions.

Remember, one of the best strategies for lowering your rates is increasing your down payment. Don’t forget to compare multiple lenders as well to secure the lowest rate possible.

Can I negotiate a mortgage rate?

If you have options from competing lenders, it’s easier to negotiate a mortgage rate. One of the best ways to do it is by using preapproval letters. At the very least, you should be able to lower origination fees or obtain preferential rate-lock terms during the negotiation phase. Remember that even a 0.2% reduction in your rate can help you save thousands of dollars over the entire loan term.

What is the 30-year mortgage rate today?

As of October 2025, the national average 30-year fixed mortgage rate is 6.3%. Remember that mortgage rates are subject to change based on your eligibility, which is determined by your loan type, lender credit score, and more. If you have excellent credit, you can expect to pay in the 5.5% range, while those with lower credit can see rates above 7%.

Are fixed or variable rates better right now?

Generally, fixed rates are a safer option than variable rates.

One of the best scenarios for adjustable-rate mortgages is if you plan to sell or refinance your home within a few years before the rate increases. Look to fix loans if you’re looking for more stability, whereas variable loans can give you short-term savings.

Do variable mortgage rates ever go down?

Yes, variable mortgage rates can go down. It all depends on the Federal Reserve’s actions and how it sets Benchmark rates. ARMs are also tied to the treasury rate, so that any change can increase or decrease your rate.

Conclusion

If you’re trying to buy a home with bad credit, don’t lose hope. Today, there are plenty of specialized programs, including FHA, VA, and alternative options, that can qualify you based on factors beyond just your credit score. Whether you’re using a comparison platform like SuperMoney or working with major banks such as Wells Fargo and Bank of America, keep in mind that many lenders accept credit scores as low as 500–580 and offer 3.5% down FHA loans, favorable VA loans, and other low-credit programs designed to improve your approval odds.