How to Improve Your Standing with Lenders & Achieve Homeownership — Even with Bad Credit
For many aspiring homeowners, bad credit can feel like an insurmountable barrier. However, poor credit doesn’t have to keep you from buying a home. By taking strategic steps to improve your financial standing and exploring lender options that accommodate lower credit scores, you can turn your homeownership dream into reality.
6 Ways to Improve Your Standing with Lenders
1. Check & Correct Your Credit Report
Errors on your credit report can drag your score down unfairly. Obtain free copies of your reports from AnnualCreditReport.com and dispute inaccuracies with the credit bureaus (Experian, Equifax, TransUnion).
2. Pay Down Existing Debt
Lenders evaluate your debt-to-income ratio (DTI)—the lower, the better. Paying down credit cards and loans can improve both your credit score and DTI.
3. Make Timely Payments
Payment history is the biggest factor in your credit score. Set up automatic payments to avoid late or missed payments.
4. Avoid New Credit Applications
Each hard inquiry can temporarily lower your score. Hold off on applying for new credit before seeking a mortgage.
5. Save for a Larger Down Payment
A bigger down payment (10%–20%+) can offset a low credit score by reducing the lender’s risk. Some programs allow down payments as low as 3.5%.
6. Consider a Co-Signer or Co-Borrower
Adding someone with strong credit (like a family member) to your mortgage application can help you qualify for better terms.
Lenders That Work with Bad Credit Borrowers
While traditional lenders (like conventional banks) typically require a minimum 620 credit score, some specialize in bad credit mortgages. Below is a list of lenders and their credit score requirements:
Bad Credit Mortgage Lenders
| Lender | Minimum Credit Score | Loan Types | Website |
|---|---|---|---|
| FHA Loans (via approved lenders) | 500 (with 10% down) or 580 (3.5% down) | FHA | HUD.gov |
| VA Loans (for veterans) | Varies (often 580–620) | VA | VA.gov |
| USDA Loans (rural buyers) | 580–640 (varies by lender) | USDA | USDA.gov |
| Rocket Mortgage | 580 (FHA), 620 (conventional) | FHA, VA, Conventional | RocketMortgage.com |
| Carrington Mortgage | 550 (FHA), 600 (VA) | FHA, VA | CarringtonMortgage.com |
| New American Funding | 580 (FHA) | FHA, VA, Conventional | NewAmericanFunding.com |
| Guild Mortgage | 580 (FHA), 620 (conventional) | FHA, VA, Conventional | GuildMortgage.com |
| Citadel Servicing Corp | 500 (non-QM loans) | Non-QM, FHA | CitadelServicing.com |
| Fairway Independent Mortgage | 580 (FHA) | FHA, VA, USDA | FairwayIndependentMC.com |
| Bank of America | 620 (conventional) | FHA, VA, Conventional | BankofAmerica.com |
Alternative Options for Bad Credit Buyers
- Lease-to-Own Agreements – Rent with an option to buy later.
- Seller Financing – The seller acts as the lender.
- Local Credit Unions – Some offer flexible underwriting.
Final Thoughts
Bad credit doesn’t have to stop you from buying a home. By improving your credit habits, saving for a down payment, and working with the right lenders, you can secure a mortgage and achieve homeownership sooner than you think.
Ready to take the next step? Check your credit score, research lenders, and consult a mortgage advisor to explore your best options!
