How to get a mortgage with bad credit?

Your credit score is one of the most important factors lenders consider before approving your mortgage or any other loan. While a good credit score is ideal to get the best terms on a mortgage, there are a few mortgage types and lenders that lend to people with bad credit as well. However, these loans will generally have higher interest rates as the chances of defaulting may be higher. A FICO^® Score below 580 is considered bad credit. 

Federal Housing Administration (FHA) loans are the most popular among people with bad credit. The FHA offers loans to people with a credit score above 580 for a down payment as low as 3./5%. But if you have a credit score between 500-579, you can still get a loan for 10% down payment.

With loans offered through the Department of Veterans Affairs — which are only available for veterans and members in active military service — eligible borrowers can qualify with a lower credit score, with a past bankruptcy, or even no down payment depending on the lender’s assessment of your finances. Moreover, the VA also guarantees a portion of the loan. 

Loans through the U.S. Department of Agriculture (USDA) are also available to borrowers in eligible rural areas with bad credit.