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Where to find home loans for bad credit



Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

Homeownership is possible even if you don’t have the best credit history. Learn where to find home loans for bad credit. (iStock)

Buying a home can be stressful. If you have bad credit, you may be worried about whether or not you can even qualify for a home loan. Many mortgage lenders do have strict requirements — but homeownership is possible, even if your credit isn’t in the best shape. 

If you’re looking for home loans for bad credit, you have options. Learn more about where to find these home loans, as well as some tips on how you can improve your credit before buying a home. 

You can get a home loan with bad credit

Fortunately, it’s possible to get approved for a home loan with bad credit. But if you do, you probably won’t receive the best rate. Typically the higher your credit score, the better rate you’ll receive. 

Lenders tend to view people with poor credit as riskier borrowers, so they charge a higher interest rate as a way to protect themselves against the risk of you defaulting on your home loan.

If you’re curious about what rates you might qualify for, Credible lets you compare mortgage lenders in one place.

What do mortgage lenders consider a bad credit score?

There’s no minimum credit score required to buy a house, as each lender has its own requirements. But most lenders look at your three-digit FICO score to determine how likely you are to repay a loan, and what type of interest rate to offer you. 

If your FICO score is below 580, your credit score is considered “poor” or “bad.” A FICO score between 580 and 669 is considered “fair,” meaning it’s below the average credit score of most U.S. consumers. FICO scores ranging from 670 to 799 are considered “good” and “very good,” and FICO scores of 800 and above are considered “exceptional.” The higher your FICO credit score, the better mortgage rate you can expect to receive. 

Other factors that mortgage lenders consider

Lenders consider other factors beyond your credit score when you apply for a mortgage.    

  • Down payment amount — A down payment is the part of your home’s purchase price that you pay upfront. The more money you put down, the less you’ll have to borrow, so you may get a lower interest rate and lower mortgage payments.
  • Debt-to-income ratio — Your DTI ratio is your monthly debt payments divided by your gross monthly income. While requirements depend on the mortgage you apply for, a DTI of less than 50% is ideal.
  • Assets and income — Lenders look at your income and assets to figure out whether you can afford a mortgage. If you can’t show that you have the resources to cover your monthly payments, you may not get approved.
  • Length of work history — You’ll likely need at least two years’ worth of work history. This can be a challenge if you recently started a business or changed jobs before or while you applied for a home loan.
  • Cosigners — If you have bad credit, you may need a cosigner to get approved for a home loan. A cosigner will be responsible for paying your mortgage if you default.

How to get a home loan with bad credit

If you want to get a home loan with bad credit, follow these tips to help you find one that’s right for your situation.

  • Shop around for lenders who work with people with bad credit. Not all lenders are created equal. Do your research and find those that lend to borrowers with bad credit.
  • Look for first-time homebuyer programs. First-time homebuyer programs can make homeownership more accessible and affordable. Check out your state’s housing agency website to learn about the programs available to you.
  • See if you qualify for down payment assistance programs. Depending on your situation, you may be eligible for down payment assistance. Many first-time homebuyer programs offer it.
  • Add a cosigner. If you have a trustworthy friend or family member with good credit, ask them to cosign your home loan. Just make sure you’re able to make your monthly payments or the responsibility will fall on them.
  • Save for a larger down payment. Since a larger down payment means you’re a less risky borrower, wait to apply for a mortgage until you’ve saved a substantial amount. A larger down payment also leads to a lower interest rate and lower monthly payments.
  • Ask your family for help. Let your loved ones know that you’re in the market for a home and could use some financial assistance. They may help you with your down payment, closing costs or other related expenses.

Credible makes it easy to compare mortgage rates from multiple lenders in minutes.

Types of home loans for bad credit

If you have bad credit, there are a number of home loan options to explore. 

Conventional loan

A conventional loan isn’t insured or guaranteed by a government entity. You can take one out through a private lender like a bank, credit union or mortgage company. While conventional loans are more difficult to qualify for than government loans, they’re also usually more flexible.

  • Minimum credit score: 620
  • Minimum down payment: 3%
  • May be good for: Borrowers with good credit and minimal debt

Fannie Mae HomeReady 

HomeReady is a conventional mortgage loan offered by Fannie Mae. If you apply for one, you can use income from your parents, grandparents, relatives and others to help you get approved. Upon approval, you may get rid of your private mortgage insurance, or PMI, after you pay down 20% of your home’s value.

  • Minimum credit score: 620
  • Minimum down payment: 3%
  • May be good for: Borrowers with lower-than-average incomes

FHA loan

FHA loans are insured by the Federal Housing Administration. While these loans have low down payment and credit score requirements, you’ll be required to pay mortgage insurance to protect the lender in the event you default. 

  • Minimum credit score: 500
  • Minimum down payment: 3.5% if your credit score is 580 or higher; 10% if your score falls in the 500-579 range
  • May be good for: Borrowers with lower credit scores and down payment amounts

Freddie Mac Home Possible 

The Freddie Mac Home Possible mortgage has a low down payment of 3%. But in order to qualify, you can’t earn more than 100% of the annual median income in your area. 

  • Minimum credit score: 660
  • Minimum down payment: 3%
  • May be good for: Borrowers with lower incomes and down payment amounts

Non-qualified (non-QM) mortgage

A non-qualified (non-QM) mortgage is for homebuyers who are unable to meet the strict criteria of a qualified mortgage, which meets federal guidelines. It can allow you to get approved for a home loan if you’re self-employed, work a nontraditional job or lack the documentation that most mortgages require.

  • Minimum credit score: Varies by lender
  • Minimum down payment: Varies by lender
  • May be good for: Borrowers who are self-employed or earn alternative sources of income

USDA loan

Backed by the United States Department of Agriculture, a USDA loan is a low-interest, zero-down-payment mortgage that can help you finance a home in an eligible rural area. 

  • Minimum credit score: 640
  • Minimum down payment: 0%
  • May be good for: Borrowers with low to moderate incomes who want to buy a home in a rural area

VA loan

A VA loan is guaranteed by the United States Department of Veterans Affairs. As long as you’re an active service member, veteran or eligible spouse, you may get approved for a VA loan with 0% down and no PMI. But keep in mind that you’ll likely have to pay a funding fee of up to 3.6% of your loan amount.

  • Minimum credit score: Varies by lender
  • Minimum down payment: 0%
  • May be good for: Borrowers who are active service members, veterans or eligible spouses

Should you get a home loan with bad credit?

Whether or not you should get a home loan with bad credit depends on your unique situation. Here are some pros and cons to consider. 

Pros of home loans for bad credit

  • Various mortgage options — Even if you have bad credit, you have a number of home loans at your disposal. You can look into both conventional and government-backed mortgages.
  • Can get approved with a higher down payment — If you’ve saved a good amount of cash for a down payment, you may secure a home loan with a lower interest rate. A higher down payment can make up for a low credit score.
  • May allow you to build equity — If you’re currently renting, a home loan for bad credit can allow you to pursue homeownership. You can build equity and potentially earn some money in the future, instead of paying for a property that will never be yours.

Cons of home loans for bad credit

  • High interest rates — If you take out a home loan for bad credit, you may be stuck with a high interest rate, which can cost you thousands of extra dollars on your home.
  • Down payment may be required — You might have to save money for a down payment. While down payment requirements vary, they’re often anywhere between 3% and 20% of the overall cost of the home.
  • May not qualify for first-time homebuyer programs — Many first-time homebuyer programs, which make homeownership easier and more affordable, require minimum credit scores. If you have bad credit, you may not be eligible.

How to improve your credit before buying a home

Before you buy a home, use these strategies to help improve your credit. 

  • Lower your DTI. To reduce your DTI, increase the amount you pay on your debt and postpone large purchases so you’re using less credit. Aim for a DTI of no more than 36%.
  • Pay down debt. Do your best to tackle as much debt as possible. Consider picking up a part-time job or starting a side hustle to help you meet your financial goals.
  • Make on-time payments. It’s important to pay your bills on time — even one late payment can hurt your credit. Set up calendar reminders or enroll in automatic payments so you don’t forget.
  • Check credit reports for accuracy and dispute any inaccurate information. Get a copy of your credit reports for free from the main credit bureaus — Equifax, Experian and TransUnion — at Dispute any errors, such as accounts with the incorrect balance, closed accounts reported as open and incorrect accounts due to identity theft.
  • Become an authorized user. Ask a family member with good credit if you can become an authorized user on their credit card. It will allow a new, positive account to appear on your credit.

If you’re ready to apply for a mortgage, compare mortgage rates in minutes using Credible.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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