FHA loans are often the most straightforward mortgage to qualify for. They have more flexible credit score and income requirements and can allow you to get a mortgage with as little as 3.5% down payment. The VA loan and USDA loan are also great options if you meet their requirements. To get a VA loan, you must be an active or retired member of the military or a military spouse.
USDA loans have income and location requirements. In general, you may also qualify for an FHA mortgage with more debt than a compliant mortgage. You can qualify with a credit score as low as 580 (with a 3.5% down payment) or even 500 (with a 10% down payment). FHA loans are federally guaranteed, which means that the government is committed to covering the mortgage if you don't repay the loan.
That guarantee allows lenders to be a little more lenient with requirements. A 15-year mortgage gives homeowners 15 years to pay it in equal fixed amounts plus interest, while a 30-year mortgage gives homeowners 30 years to repay it. Citibank doesn't list its minimum FHA score requirements online, but you may be able to get a mortgage with a score as low as 580 if your finances are in good shape, according to a loan officer who spoke to Insider. VA loans allow you to finance up to 100% of the purchase price of the home without having to pay private mortgage insurance. It also accepts non-traditional loans from borrowers who have no credit history through Guild's Full Rate program, which is available on your FHA, VA and USDA mortgages. Mortgage lender requirements for borrowers vary, but if you have bad credit, you should look for lenders who are willing to consider alternative credit data.
Mortgage rates change almost daily and may depend on market forces, such as inflation and the economy in general. Your credit score can determine the types of mortgage loans you are eligible for, the interest rate you will be offered, and the amount of down payment you must make. The higher your credit score, the more likely you are to be eligible for a lower mortgage interest rate. While some lenders provide conventional loans to homebuyers with bad credit, you'll often get more affordable financing if you get a low-credit mortgage secured by a government agency. Keep in mind that these types of loans are not sponsored by Fannie Mae or Freddie Mac and generally have more stringent credit rating and debt-to-income ratio requirements.
There are three main government-backed loan options that might be available to borrowers looking for bad credit home loans. You can't change your work history, but you can do everything you can to make sure your employment situation is stable before you start applying for mortgages. If you apply for a mortgage with your spouse, lenders will use the lower credit rating of the two averages.