Bad Credit Mortgage Loans Guaranteed Approval

Considering investing in real estate? Feeling deterred by your bad credit? Thinking it might be a good time because of lower interest rates…or is the market about to crash?

After the Federal Government made cuts to interest rates, more people are considering investing in real estate, putting pressure on lenders. The uncertainty of COVID-19 and how it will impact the housing market has resulted in less houses on the market, as sellers pull back.

Lower interest rates driving demand, coupled with rising home prices due to less houses on the market, has caused some confusion among people considering buying a home or investing in property.

In reality, deciding whether to invest or not depends on where you reside, and how long the pandemic will last. However, if you find a home that feels like the right fit for you, have a stable job, and get low rates on your financing, then buying a home could just be the wisest thing to do – even now.

Having a bad credit score shouldn’t deter you either: there are lenders out there with manageable terms and lower rates. You just need to know which ones to look at.

In this review, we list the top five lenders for bad credit mortgage loans for guaranteed approval. We also go through the best loans to consider if you have bad credit, along with the best thing to do before you take out a mortgage.

The Best Mortgage Loans for Bad Credit

1. LendingTree: Best Overall

Founded in 1996, LendingTree has facilitated over 55 million loans and $250 billion+ in closed loan transactions. The company helps those with bad credit get the best deal on their mortgage loans.

The platform is not a broker or a mortgage lender. Rather, it gives borrowers multiple offers from several lenders, making it easy to compare and contrast your options.

Because of the competitive nature of the platform, mortgage bankers and brokers offer lower rates and fees to compete with each other for the borrower’s business.

The LendingTree process is fairly simple and straightforward. The first step is to submit an application through the company’s website or by calling an 800 number.

You’ll be asked some standard mortgage application questions such as your assets, any debts, gross income, how long you’ve been at your current job, and your Social Security number so that a credit report can be pulled. This information is used to choose the lenders it submits your application to.

The platform will submit applications that display a bad credit score only to lenders and brokers likely to accept the offer. Mostly, this will be about four or five companies.

Once the application is submitted, borrowers can expect to start being contacted by mortgage companies within five to 10 minutes later. Just keep in mind, the person that contacts you is paid to convince you that this is the best deal out there.

LendingTree also offers a LoanExplorer page that shows current quotes based on a few different parameters you can submit without giving your identification. This is specifically customized for mortgage loans.

The lending terms vary significantly. Again, this depends on your income, credit score, and amount you are looking to borrow.

Though, those with bad credit are likely to get a guaranteed approval. Generally, the loan range starts at about three years.

The company advertises 5/1 adjustable rate mortgages beginning at 2.97% APRs, but it could go as high as 29.9%. Keep in mind, LendingTree might not be permitted in some states.

There are an expansive range of funding sources, from mortgage lending companies to banks to bids from lenders that could be individual lenders, partnerships or small companies.

LendingTree has had some complaints from consumers about unwanted spam and too many phone calls from potential lenders. Though these calls are not directly from LendingTree, they are from the funders, this could be considered a downfall to the platform.

When agreeing to LendingTree’s terms of service, you are agreeing to binding arbitration to resolving disputes through LendingTree. In general, LendingTree does not accept any responsibility for the lenders and advertisements displayed on its website.

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2. FHA Rate Guide: Best Runner-up

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3. Wells Fargo Home Mortgage: Best for Low Down Payments

Wells Fargo generally needs no introduction. It is a multinational financial services company, and one of the biggest lenders in the United States. Borrowers can access a selection of purchase and refinancing mortgage products, not to mention home equity lines of credit (HELOCs).

Easy to OwnSM programs give options to those with bad credit, limited credit history, and on a lower income. The company also offers low down payments for those who may be a bit tight on cash as a result of the current Covid-19 pandemic.

Wells Fargo publishes a list of its current mortgage rates which is updated on a daily basis. The company offers highly competitive rates for those with strong credit but rates are still reasonable for those looking for a mortgage with bad credit. If you have bad credit, note that the rates published on the Well Fargo website typically assume a top-tier FICO Score (740+) as well as a 20% down payment.

As one of the biggest mortgage lenders in the U.S, Wells Fargo offers a wide variety of options. For purchases, the company offers fixed-rate loans with 30, 20, and 15 years terms. 5/1 and 7/1 ARMs, jumbo loans with adjustable or fixed rates, VA mortgages, as well as FHA and USDA loans.

If you are struggling to improve your credit score, the bank offers a few different refinance loan structures, and HELOCs with the option between a variable and fixed rate. 

Wells Fargo has a good variety of educational articles and videos that can help guide you through your mortgage journey. Not quite sure what the difference is between interest rates and APRs?

You can watch a short, easy-to-follow video explaining. Other videos offer explanations of determining your price range, down payments, the mortgage process itself, and the difference between pre-qualification and pre-approval, to name a few.

While most banks offering mortgages have HELOCs, the Wells Fargo Home Mortgage is a bit different. The company’s HELOCs start off as a variable-rate credit line (which is pretty standard across the industry), then borrowers are given the option to convert part or all of their balance into a fixed-rate advance with a set interest rate for a one-20 year term.

In addition to offering all the typical ways to buy a home with less than 5% down including FHA, USDA, and VA mortgages, Wells Fargo has its own yourFirst Mortgage loan. 

The yourFirst Mortgage loan is a fixed-rate mortgage with the requirement of a 3% down payment. Unlike other programs, like USDA loans, the yourFirst Mortgage loan does not require lenders to have a maximum income limitation. And despite the names, there’s also no requirement for applicants to be a first-time homebuyer to take advantage.

Unlike some lenders which only offer its services in certain states, Wells Fargo’s huge network of around 5,400 branches across the U.S makes this bank highly accessible if you want guaranteed approval for a mortgage loan with bad credit.

Last but certainly not least, Well Fargo offers customers the flexibility needed to feel comfortable during times when our financial situation is so uncertain.

Wells Fargo offers updated interest rates daily, covering all of the APRs, and loan terms, which reflect the overall cost of borrowing.

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4. PNC Bank Mortgage: Considers Non-Traditional Credit History

PNC Bank Mortgage offers diverse loan products and competitive terms for bad credit mortgage loans, including some PMI options to take your pick from.

PNC is another ideal option for borrowers looking for a low down payment mortgage, including low to moderate income earners who might fit the requirements for a PNC cash grant. Also, PNC’s pre-approval comes with a firm commitment to lend, for all borrowers.

PNC offers a varied selection of loans that should appeal to most borrowers. PNC offers the most sought after government backed mortgages, including FHA loans (Federal Housing Administration), USDA loans (U.S Department of Agriculture). Borrowers can access up to $5 million with these loans.

The company offers a few different loan programs that assist borrowers in attaining homeownership without a huge cash outlay.

Anyone finding it difficult to manage finances at the moment, avoiding private mortgage insurance (PMI) could apply for a mortgage of 80% of the value of the home, and a HELOC for 9.9% of the value of the home. Then, the down payment requirement is only 10.1%, with no addition of a PMI.

PNC offers FHA loans, which are loans that the bank made and the Federal Housing Administration (FHA) guarantees. These require a down payment of 3.5%. In addition, a PNC community loan. This is a loan program offered by PNC only, with a down payment requirement of 3%, and no PMI.

Medical interns, fellows, residents, and doctors who have completed their residency in the last five years can access a special mortgage. Cash grants, of $1,500, towards the down payment are also available, based on income limits, and where you reside.

With more Americans considering buying a home as a result of Covid-19, it has arguably caused a move away from compacted, urban areas, towards more suburban, less-populated cities, where they can buy more with their money. If this is something that is viable for you, then it would be good to consider as a money efficient option.

The pre-approval process can be done from the comfort of your home, and its online tools are informative, educational, and all geared towards first time buyers looking to learn more about home loans. Tools include interactive calculators, a Home Insight Planner, and an Application Tracker.

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5. New American Funding: Best for Customer Service

Diverse loan terms and products on top of low rates, are a tough combo to come by. Those considering a mortgage can feel more at ease knowing there is a guaranteed fast closing.

In 2018, New American Funding was the 16th biggest mortgage lender by loan volume in the U.S, making $10.1 billion in loans. With a humble beginning by a husband and wife team in 2003, the company now funds mortgages throughout the country.

New American Funding is best suited to self-employed borrowers, since it offers non-QM mortgages that can’t be gotten from all lenders.

Another highlight of the company is its focus on helping people in underserved communities become the proud new owners of a home.

In addition to all the typical loan offerings you come to know on your mortgage journey, New American Funding offers several other special mortgage loans. These include:

• Energy-efficient mortgages to finance certain home improvements.
• Non-qualified mortgages, generally for self-employed borrowers and those that do not qualify based on tax returns.
• Reverse mortgages for homeowners with substantial equity who want to receive a monthly payment. These aren’t right for everyone though, and should be carefully researched and considered.

New American Funding guarantees that it will close the loan within 14 days or pay $250 off their closing costs. This is a significantly shorter period than the industry standard of 40 days. However, it is only applicable to purchase loans, and not brokered loans.

First time home buyers will be happy to know that New American Funding will connect you to resources that will help make the process of owning a home easier. To secure a home without needing to put any, or too much, money down, the company will advise you about the payment assistance and grant programs that you may be able to access in your region.

New American Funding really prioritizes customer satisfaction and its customer service team, offering services in both English and Spanish. Lastly, you will find that its website is clear, and you will find the answers to many of your questions. It also offers helpful information on VA loans, FHA loans, USDA loans, a mortgage calculator and cash-out refis.

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How to Secure a Mortgage With Bad Credit

When you’re ready, buying your first house can be a smart investment. You can also end up in a financial disaster if you choose the wrong mortgage.

Right now, the housing market is red hot. In June, home sales surged almost 21% – the biggest monthly gain on record.

So it makes sense that you understand everything you need to know before choosing a bad credit mortgage. Below, we discuss how the coronavirus impacts mortgages, different loans to consider, and whether you can even buy a house with bad credit.

How Coronavirus Impacts Loan Rates

The recent cuts to interest rates have affected mortgages differently. It has also created a spike in demand which has put pressure on lenders. As a result, some government-back mortgages like FHA loans have higher rates, and lenders are tightening their standards in the midst of economic uncertainty.

Overall, there is expected to be an increase in lending during COVID-19 due to the lower rates.

How the Federal Rate Impacts Mortgages

The federal funds rate affects short-term loans, such as adjustable-rate mortgages, which unlike fixed-rate mortgages, have interest rates that float up and down, and credit card debt. Long term fixed rate mortgages are generally not affected by the fed funds rate.

What to Consider If You’re Shopping for a Mortgage

Buying a home during the Covid-19 pandemic can be done under the right circumstances. Starting with the basics, if you like the home, have a stable income, and find a bad credit mortgage loan with manageable rates, considering buying the property would not be a bad move. The same goes for those looking to invest in property.

Though it’s difficult to time the real estate market. Where it was once thought that investing in property was a safe bet, we have already seen the real estate market suffer two huge shocks. The first, the 2008 financial crisis, and the second we are witnessing, and living through, now.

Without a job, people will not be able to repay any debts. That said, people did not have the safety of government aid programs during the Great Recession of 2008, 

Therefore, the best we can do is outline the basics of property buying:

1. Ask yourself how long you will stay in your new home for. If you think it will be less than five years, try to find one that you can build value on.
2. Have a good understanding of your budget. Especially now, don’t spend beyond your means and hope that it works out. Prices will likely decline in the short run, so be aware of overspending.
3. Find somewhere that meets your needs. Buy something that meets your basics needs now, and invest in improvements over time.
4. Look for a suitable neighbourhood for you. Look for somewhere with a good school district, as this will likely hold the value of the home.
5. Make sure that the terms of your mortgage works for you now.

Can I Get Approved for a Home Loan With a 500 Credit Score?

One of the first things a lender will do when you apply for a mortgage is check your credit score. This can range from 300 – 850 for base scores and from 250 – 900 for industry specific score.

The better your credit score, the more chance you have of qualifying for better rates. This is typically in the range of 700 or higher. If your credit score falls below this, you will find it more difficult to get a mortgage loan, and you’ll probably have to pay unfair rates for the ones you do qualify for.

Though, if your score drops below 620, you could find yourself in the difficult position. To prevent this from happening, consider using a top credit monitoring service. This will safeguard your credit and let you know of any suspicious activity.

While it is possible to get a home loan with a score in the 600s, the CFPB warns that these loans tend to be attached to higher interest rates which could put you at risk of default. This is because if you are paying higher interest rates, then it will be more difficult to repay. 
For this reason, it makes sense to look into some of the leading credit repair companies and try to improve your credit before you buy a house.

Can I Get a Mortgage with Bad Credit?

While getting a loan with bad credit can be difficult, some lenders are willing to work with borrowers with lower scores. 

Basically, a subprime mortgage is a loan with higher interest rates than conventional loans, accessible to borrowers with better credit. Unfortunately, subprime loans not only have increased rates, but there are also other features that make them risky loans.

These loans can start off with a lower rate than a fixed rate mortgage but then the interest can increase once the introductory term is over.

What Types of Home Loans Are Available for Those With Bad Credit?

While there are bad credit loan options out there for other purposes, bad credit mortgage loans can be more tricky to work out. To start, we suggest you avoid a subprime loan because of its risks. Here are the details of some viable alternatives if you are looking for a mortgage with bad credit:

1. FHA Loans: The Federal Housing Administration is set up to help potential homebuyers secure mortgages even without the best credit score. To qualify for an FHA loan you will only need a credit score of 580, which will require a down payment of 3.5% of the purchase price of your home.
2. VA loans: VA loans are available to active-duty military members and veterans and are guaranteed by the Department of Veterans Affairs. Your credit score will typically need to be 620 or higher to qualify, but some lenders will accept a credit score of 580. Importantly, VA loan limits will depend on the home’s location, and in some cases, VA home loans require a 0% down payment.
3. USDA loans: The aim of USDA loans is to assist those on a lower-income who want to buy homes in rural areas. This loan typically requires a credit score of 640 or higher but again, some lenders will accept lower scores. You may also be eligible for a 0% down payment with this loan.
4. Fannie Mae HomeReady loans: These are specifically created to assist lower-income borrowers. You will need to have a credit score of 620 or more to qualify for this, along with a downpayment of only 3%, in some cases.
5. Freddie Mac Home Possible® loans: The aim of these is to create more accessible loans for homebuyers with moderate incomes. You may be eligible for a down payment as little as 3%.

Bad Credit Mortgage Loans: The FHA Loan

If you have a bad credit score as a result of certain events in your life then qualifying for a conventional loan can be extremely difficult.

Other Government loans like the USDA or VA are less forgiving than FHA loans. For these, lenders generally require a FICO score of 620. Plus, you would need to live in a rural area or be a veteran.

If you are a first time home buyer and have bad credit combined with a low down payment, a low credit score FHA loan may be the best option for you. It also wouldn’t hurt checking out if there’s anything you can get removed from your credit report. This could make a huge difference to your financial future.

Can I Get an FHA Loan With Bad Credit?

In most cases, lenders require a minimum score of 620 for conventional loans, whereas requirements for FHA loans are looser. Homebuyers with a score as low as 500 could be eligible to access an FHA loan.

What Credit Score Do I Need for an FHA Loan?

Rising housing costs and crippling student debt means more people are looking for loans with low-down payment requirements.

To be considered for an FHA loan you will need to meet these minimum requirements:

• Minimum FICO score requirement of 500
• Credit score of 580+ will qualify you for a 3.5% down payment.
• Credit score of 500 to 579 will qualify you for a 10%+ down payment.

What is the Minimum Credit Score for Down Payment Assistance?

As outlined above, the minimum credit score for down payment assistance is 580 to be eligible for a 3.5% down payment, and a score of 500 or more to qualify for a 10% down payment.

Do All Banks Do FHA Loans?

In order to offer an FHA-insured home loan, a mortgage lender must be approved by the federal agency managing the program. Because this loan is highly sought after, most banks offer FHA loans.

What Makes a House FHA Approved?

Of course, the saying goes nothing in life is guaranteed – except death and taxes! However, if you meet the following requirements then your FHA mortgage is virtually guaranteed.

Before you look into applying for an FHA loan, consider doing some research on how debt consolidation works. If you have numerous debts, consolidating your debts could increase your chances of getting better rates.

• You meet the down payment and minimum credit score requirement
• You have had income for the last two years.
• You have sufficient income to meet the loan repayments.
• You haven’t been bankrupt within the past two years, not have you had a foreclosure in the past three years.
• The home is to be your main residence and is in good condition. 

If you meet these requirements, your bad credit FHA mortgage should have guaranteed approval.

What Will Fail an FHA Appraisal?

The structure of the property must be in a livable condition. This means that there must be no dampness, leakage, structural damage, termite damage, or decay or the property could fail inspection. In this case, the house must be repaired before the FHA loan can be approved.

What Is the Downside of a FHA Loan?

Traditionally, a key benefit of an FHA loan is the lower interest rates. However, this isn’t always true for those with bad credit scores. If you have a low credit score your FHA rate will be a little more than someone with a higher credit score.

What Mortgage Company Works With Bad Credit?

When you’re shopping for a mortgage, regardless of your credit score, you should compare rates and terms from various lenders. Looking at some of the top debt consolidation loans also could also help you get better rates. This is especially true if you have bad credit that can make it harder to find manageable terms. 

Consider lenders like:

• National and community banks
• Mortgage companies
• Credit unions

Who is the Best Mortgage Lender for Bad Credit?

To help you find a mortgage lender offering better terms, we recommend consulting our list of the top bad credit mortgage loans for guaranteed approval, and doing some further research to find the best one for your situation.

Can I Get Preapproved for a Mortgage With Bad Credit?

To get pre-approved for a bad credit mortgage loan, you will need to fill out the lender’s mortgage application process. The lender will review the information offers and give you an estimate of the amount of the loan they can offer.

What is Considered a Good FICO Score?

Learning how to comprehend your credit report is crucial. FICO Scores are used by many lenders, and generally range from 300 to 850. A good FICO score is considered to be 670 or higher. A score above 800 is considered to be exceptional.

Can I Buy a House With Bad Credit and No Money Down?

As you’ve just seen, Government backed Va and USDA loans can enable you to buy a home with bad credit and $0 money down.

How Long Do Lenders Look at Positive Credit History?

Typically, lenders will look for about 12-18 months of positive history. This includes no late or missed payments, and modest balances.

What Credit Score Do You Need to Refinance Your Mortgage?

To refinance your mortgage, credit requirements vary from lender to lender, and depend on the mortgage type. Generally though, you’ll need a minimum credit score of 620 for a conventional mortgage.

What is a Good Credit Score for a First Time Home Buyer?

First time home buyers usually need to have a credit score of 640 to qualify for homebuyer assistance. That said, chances are you might need a score of up to 680 to qualify for a conventional mortgage. It could be a good idea to look into credit repair companies near you. 

A good credit repair company will look after any errors on your report for you so you don’t have to go through the time consuming legalwork yourself.

How Much is a Payment on a $200,000 House?

For example, if you borrow $200,000 at 5% with a loan range of 30 years, you will pay $1,073.64 per month. With fixed-rate mortgages, this will stay the same over the loan term.

Will Adding My Spouse as an Authorized User Help His/Her Credit?

Adding your spouse as an authorized user could help their credit, and it will not harm yours. Your credit score is a reflection of your credit history, so your score won’t include your partners.

How Can I Quickly Raise My Credit Score?

Here are some ways you can quickly raise your credit score:

1. You can check your credit report with Experian. Your credit score is based on the information contained in your credit report.
2. Create a budget and stick to it.
3. Make sure all your payments are on time and paid in full.
4. Put some of your wage towards an emergency fund.
5. Use the UltraFICO and Experian Boost programs. 
6. Be careful about closing credit cards because this can lower your credit score by causing your available credit to drop and thus, reducing your borrowing power, and more importantly, your credit-utilization ratio.
7. Don’t wait, the quicker you begin improving your finances the more likely you are to improve your credit score.

The Bottom Line

Qualifying for a bad credit mortgage is not impossible. You’ll need to consider your options carefully and might want to look a bit deeper into FHA loans to get the best rates.

Before considering a bad credit mortgage loan though, consider working towards improving your credit score. Better credit score will help you find a better loan, with more manageable loan terms and lower interest rates.

You might also want to look into debt consolidation loans for bad credit to help you streamline your payments, potentially pay a lower interest, and in turn improve your credit. All of which will give you a better chance of qualifying for a conventional mortgage loan.