Best Mortgages for Bad Credit of 2020

Buying a house with bad credit can be tricky. However, your credit score is only one part of your mortgage application. You have several government-backed loan options that might lend to you even if your credit score is under 600. The best bad credit mortgages allow you to make a low down payment and have low interest rates. Using our SimpleScore methodology, we rated and reviewed the top mortgage lenders for bad credit of 2020.

The 7 best mortgages for bad credit of 2020

The best mortgages for bad credit at a glance

APR Minimum Credit Score FHA Minimum Down Payment
New American Funding 3.62% FHA 600 3.00%
Quicken Loans 4.81% FHA 560 3.50%
Rocket Mortgage 3.49% FHA 560 3.50%
SunTrust Bank 3.6143% FHA 580 3.50%
TD Bank 4.138% FHA 580 3.00%
US Bank 4.31% FHA 580 3.50%
Wells Fargo Home Mortgage 2.961% VA 600 3.00%

New American Funding: Best for loan variety

New American Funding

New American Funding offers a wide variety of types of loans but less online rate access than other options.

30Y FHA APR
3.62%
J.D Power
Not Rated
Fees
4
SimpleScore
3 / 5.0
close
SimpleScore
New American Funding
3
  • Perks
    4
  • Credit Impact
    4
  • Customer Satisfaction
    N/A
  • Min. Credit Score
    3
  • Fees
    3
New American Funding has almost any loan you can imagine — conventional, government-backed, rural housing, veteran-focused and more. Therefore, if you’re looking for a one-stop-shop for loans you can qualify for with a low credit score, New American could be your place. Its rates are lower than some other options out there, as well. You can get a loan from this company in any state except New York and Hawaii.

However, one big drawback is the lack of rate shopping online. To get a rate quote, you have to fill in your information, so for the casual browser, this lender isn’t the easiest choice. Other lenders show a breakdown of rates on their websites that make it easier to look at multiple lenders without committing to anything.

Full review

Our Two Cents — We like New American Funding for its array of bad credit loans. However, we’d prefer to be able to make more headway in the application process online rather than calling a representative.

Quicken Loans: Best for customer satisfaction

Quicken Loans

Customer ratings are the best with Quicken Loans, but the rates may be slightly higher than some other options.

30Y FHA APR
4.81%
J.D Power
5/5
Fees
3
SimpleScore
4 / 5.0
close
SimpleScore
Quicken Loans
4
  • Perks
    4
  • Credit Impact
    4
  • Customer Satisfaction
    5
  • Min. Credit Score
    5
  • Fees
    2
Quicken Loans has more pros than cons when you're buying a house with bad credit. It received the top customer satisfaction rating from JD Power and has one of the largest varieties of loan offerings on the list. Also, you can shop rates online, as well as work with its online application website, Rocket Mortgages, to apply for a loan.

The main potential downside is that its rates came up slightly higher than other choices on the list. Additionally, the overall APR was quite high, so you could pay more by using its bad credit home loans service.

Full review

Our Two Cents — We like Quicken Loans for its ease of use online, its top customer ratings and its variety of options for customers to consider.

Rocket Mortgage: Best for Online Process

Rocket Mortgage

Customer satisfaction is high for this online branch of Quicken Loans, making it a good choice if you want a hassle-free experience.

30Y FHA APR
4.75%
J.D Power
5/5
Fees
3
SimpleScore
3.8 / 5.0
close
SimpleScore
Rocket Mortgage
3.8
  • Perks
    4
  • Credit Impact
    4
  • Customer Satisfaction
    5
  • Min. Credit Score
    5
  • Fees
    1
Rocket Mortgage is the online offshoot of Quicken Loans. When you apply for a bad credit mortgage through Quicken Loans, you'll head straight to Rocket Mortgage. Thus, the positive review of Quicken Loans holds true for Rocket Mortgage, as well. It leads the pack in customer ratings, gives a lot of choices for types of loans and gives you an accessible online portal for your loan application.

The main issue we found with Rocket Mortgage is that its rates can be higher than much of the competition. Plus, the APR — which includes the interest, plus broker and lender fees — is one of the higher rates as well. Thus, you might end up paying more for top-notch customer service.

Full review

Our Two Cents — We like Rocket Mortgages for its top-notch customer satisfaction ratings, its large array of loan choices and its straightforward online platform.

Suntrust Bank: Best for low interest rates

Suntrust Bank

Suntrust provided the lowest current rates out of all the lenders we looked at, but the overall APR is higher than average.

30Y FHA APR
3.6143%
J.D Power
4/5
Fees
3
SimpleScore
4 / 5.0
close
SimpleScore
Suntrust Bank
4
  • Perks
    4
  • Credit Impact
    3
  • Customer Satisfaction
    4
  • Min. Credit Score
    5
  • Fees
    4
SunTrust Bank offers a lot of positive aspects, like online rate shopping. You can see today's estimated rates on its website, which makes it simpler when you're looking at multiple lenders. Plus, the mortgage rates we found were lower than all the others on this list, and there's no origination fee. Also, it can boast higher-than-average customer satisfaction ratings.

However, the APR, which is your interest rate plus any monthly fees, is higher than the rest of the options on the list. Therefore, you might end up paying about the same amount as other lenders when all is said and done. When you're shopping for bad credit loans, make sure to examine the overall APR as well as the interest rate.

Full review

Our Two Cents — We appreciate that SunTrust has positive customer satisfaction ratings, allows online rate shopping and offers the lowest rates on the list. However, the APR comes up higher than the competition, meaning you might end up paying the same amount as other options.

TD Bank: Best for construction loans

TD Bank

If you're looking to build your own home, TD Bank's new construction loan could be a good fit, but customer ratings are a bit lower than its competitors.

30Y FHA APR
4.138%
J.D Power
3/5
Fees
3
SimpleScore
3.2 / 5.0
close
SimpleScore
TD Bank
3.2
  • Perks
    3
  • Credit Impact
    3
  • Customer Satisfaction
    3
  • Min. Credit Score
    5
  • Fees
    2
If you're looking to build new construction, you might consider a mortgage through TD Bank. Its new home construction loans make the process easy because you only have one closing when the installation is finished. Additionally, you can rate shop and apply for a loan online, which is convenient for anyone comparing lenders.

On the other hand, the bank's rates are average, and the overall APR with its FHA loan is quite high. Plus, it's only available on the East Coast of the United States, and the customer satisfaction ratings are a bit lower than the competition.

Full review

Our Two Cents — TD Bank is an excellent option if you're looking to build a new home — on the East Coast, However, there may be better options if you're looking for a government-backed loan.

US Bank: Best for easy online experience

US Bank

US Bank offers a lot of information on the mortgage process, fees, and rates on its website, which makes it a pleasant online experience.

30Y FHA APR
4.31%
J.D Power
3/5
Fees
3
SimpleScore
3.6 / 5.0
close
SimpleScore
US Bank
3.6
  • Perks
    4
  • Credit Impact
    4
  • Customer Satisfaction
    3
  • Min. Credit Score
    5
  • Fees
    2
US Bank stood out for the amount of upfront information it gives the customer on its website about today's rates, fees and the application process. The information is useful for customers to have, and you don't even have to make a phone call to find out. Also, to pre-qualify, the bank performs a soft credit check, so you don't have to worry about your credit score going down in the beginning.

However, the mortgage rates are slightly higher than the others on the list. Furthermore, US Bank received middle-of-the-road marks from J.D. Power in terms of customer satisfaction. It may have some catching up to do before it becomes customers' first choice.

Full review

Our Two Cents — We appreciate the amount of upfront information about its mortgages that US Bank supplies on its website. However, its average customer ratings and higher rates may mean it's not for everyone.

Wells Fargo Home Mortgage: Best for VA loans

Wells Fargo Home Mortgage

Wells Fargo gives customers a large variety of loan options, and your best bet for a bad credit mortgage is the VA loan program through Wells Fargo.

30Y VA APR
2.961%
J.D Power
3/5
Fees
3
SimpleScore
3 / 5.0
close
SimpleScore
Wells Fargo Home Mortgage
3
  • Perks
    4
  • Credit Impact
    3
  • Customer Satisfaction
    3
  • Min. Credit Score
    3
  • Fees
    2
Wells Fargo's VA program specializes in getting veterans and military members into their homes. It comes with low or no down payments — 100% financing can come from the loan itself. Furthermore, closing costs and down payments (if required) can come from a grant or cash gift, making it easy to scrounge up the cash for closing costs.

However, many potential mortgage customers may balk at the idea of closing with Wells Fargo after the bank was found performing account fraud in recent years, in addition to a glitch in the system that foreclosed people's homes without reason. Some people stopped trusting the bank after this information came out.

Full review

Our Two Cents — Wells Fargo provides one of the only USDA loan offerings on the list, so rural America could benefit from this lender. However, the recent fraud scandal may have tainted people's faith in the bank.

What is a mortgage for bad credit?

Buying a house with bad credit is possible, but you need to look for loans that allow you to have a low credit score, as well as a small down payment requirement. Some examples are government-backed mortgages, like those through the Federal Housing Administration (FHA), Veterans Affairs (VA) or U.S. Department of Agriculture (USDA).

With these loans, you can sometimes qualify if your credit score is above 500. Most requirements state your score must be above 580, but your credit score is only one piece of your entire application. If the rest of your application looks good, or you have enough cash saved up for a 20% down payment, you might be able to get a home loan.

How should I choose the right mortgage for bad credit?

Picking the right mortgage when you have bad credit is crucial. First, examine the different loans out there and see what you qualify for. For example, to get a VA loan, you have to be a veteran.

After you find the loans that you qualify for, shop around for different lenders. Use online rate shopping to find the lowest interest rates, and don’t forget to look at APR, which includes the monthly fees tacked onto your payment. Sometimes the initial rate might be small, but the APR is quite high.

Then apply for several loans at one time. Don’t start applying until you’re ready to complete several applications within 14 days. Applying for a mortgage usually requires a hard credit check, which can lower your credit score temporarily by a few points. However, if you apply for several close together, the credit bureaus lump them together into one credit pull.

Too long, didn’t read?

If you’re wondering how to buy a house with bad credit, don’t worry. There are options out there you can qualify for, and your credit score is only a small part of your overall qualifying factors. Don’t let your credit score discourage you from shopping for rates online, calling different lenders and comparing home loan offerings.

Keep reading

Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For bad credit mortgage loans, we compared perks, credit impact to check rates, customer satisfaction, minimum credit score requirements and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a bad credit mortgage loan provider. Be sure to continue your research and shop around for the best mortgage loan that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the bad credit mortgages we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Tiffany Verbeck
Tiffany Verbeck
Contributing Writer

Tiffany Verbeck is a personal finance expert. She uses her storytelling skills gained from a master’s degree in writing to run a freelancing business focused on helping people make and manage their money. She has been published in The Financial Diet, Fast Capital 360, The Write Life, Matador Network and other publications

Reviewed by

  • Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.