Best Mortgage Lenders That Accept 500 Credit Score

Benzinga readers often choose CrossCountry Mortgage as their mortgage lender if they have a 500 credit score.

Buying a home and securing a mortgage is daunting for most new home buyers. If you’ve got a low credit score, it can become even more challenging. The good news? Several exceptional lenders are willing to offer mortgages to borrowers with credit scores as low as 500. These include Federal Housing Administration (FHA) loans, where you may only need to put 10% down.  Read on for the best mortgage lenders that accept 500 credit scores.

Quick Look: Best Mortgage Lenders for 500 Credit Score

• Best for Overall Mortgage Options: Angel Oak Mortgage Solutions
• Best for Borrowers Without an SSN: New American Funding
• Best for First-time Homebuyers: Alterra Home Loans
• Best for Low Down Payment Options: Citibank
• Best for Flexible Options: Carrington Mortgage Services
• Best for Borrowers with Low Credit: LoanDepot
• Best for Self-Employed Borrowers: CashCall Mortgage

7 Best Mortgage Lenders That Accept 500 Credit Score

Need fast closing, great customer service and flexible requirements? The lenders below could help you secure a mortgage and a new home with a low credit score. Find out why they’re great options.

1. Best for Overall Mortgage Options: Angel Oak Mortgage Solutions

Angel Oak Mortgage Solutions specializes in offering loans for borrowers who are considered riskier. As a wholesale mortgage lender specializing in nonqualified mortgages, Angel Oak Mortgage Solutions works as a mortgage broker to help borrowers with low credit scores or other unusual financial situations secure a mortgage.

• States served: Not available in Alaska, Massachusetts, New York and Vermont

2. Best for Borrowers Without an SSN: New American Funding

New American Funding offers many loan products, including construction loans, government-backed mortgages and individual taxpayer identification number (ITIN) loans. New American has excellent customer service, customized quotes and the option to use a home equity line of credit (HELOC) for an owner-occupied or a second home. With a focus on helping the underserved community, New American Funding knows how to help you. 

• Minimum credit score: 500 (FHA loans)
• Minimum down payment: 3.5%
• States served: All 50 states

3. Best for First-time Homebuyers: Alterra

Alterra works to expand homeownership in underrepresented groups. This includes options for borrowers with low credit scores, first-time home buyers and people who are ineligible for Social Security numbers. With a simple online application and government-backed mortgages for low- to moderate-income borrowers, Alterra has options and may work with you regardless of your credit score and income. 

• Minimum credit score: 580 (FHA loans)
• Minimum down payment: 3.5%
• States served: Not available in Arkansas, Iowa, Maine, Massachusetts, New York, North Dakota, South Dakota, West Virginia, Wyoming, Vermont

4. Best for Low Down Payment Options: Citibank

Citibank offers a large, established banking brand with a strong reputation. Borrowers could secure a low down payment mortgage, government-backed loans or work with Citibank’s loan offers for proprietary options.

• Minimum credit score: 580 (FHA loans)
• Minimum down payment: 3%
• States served: All 50 states

5. Best for Flexible Options: Carrington

Carrington offers various mortgage options for buyers with low credit or other unusual financial situations. It specializes in helping credit-challenged borrowers interested in government loan products. If you want simple application options and personalized service, Carrington could help.

• Minimum credit score: 500 (FHA loans)
• Minimum down payment: 3%
• States served: All 50 states and Puerto Rico

6. Best for Borrowers with Low Credit: loanDepot

loanDepot offers several attractive features. loanDepot offers unique benefits for borrowers buying through its partner mellohome. This includes a streamlined homebuying process for qualified borrowers.

• Minimum credit score: 500 (FHA loans) but depends on the provider
• Minimum down payment: 3% but depends on the provider
• States served: All 50 states

7. Best for Self-Employed Borrowers: CashCall Mortgage

CashCall Mortgage offers various loan options for borrowers with low credit scores. It also offers options for self-employed homebuyers, such as bank statement loans or using 1099 forms as documentation. To get a personalized quote, speak with a loan officer.

• Minimum credit score: 580 (FHA loans)
• Minimum down payment: 3%
• States served: Not available in Connecticut, Delaware, Maine, Maryland, Massachusetts, Missouri, New York and Wyoming

Understanding How You Can Get a Mortgage with a Credit Score of 500

If you’ve got a low credit score, many lenders won’t offer you a mortgage. But some lenders are willing to work with borrowers who have a credit score of 500 or lower. These loans typically come with higher interest rates or fees, but you can secure a home and consider refinancing later. 

What Interest Rates Can You Expect with a Credit Score of 500?

Interest rates can fluctuate depending on various factors, but a lower credit score may generally result in higher interest rates. Even for borrowers with exceptional credit scores, interest rates are at a 20-year high. For that reason, borrowers with low credit scores can expect to pay significantly more in interest over the loan’s lifetime.  

What Documents Do You Need to Apply for a Mortgage with a 500 Credit Score?

The documents you need to apply for a mortgage are the same whether you have a credit score of 500 or 800. Typically, you must provide documents such as pay stubs, W-2 forms, tax returns, bank statements and government-issued identification.

Tips for Increasing Chances of Mortgage Approval with a 500 Credit Score

Before applying for a mortgage, consider improving your credit score to secure a lower interest rate or qualify for more loan options. Here are the key steps to consider. 

Pay Bills on Time

On-time payments make up 35% of your credit score. Paying bills on time can improve your credit score over time and help increase the chances of mortgage approval. You can set up automatic payments for the minimum on all credit cards and bills to avoid missing a payment. 

Reduce Outstanding Debt

Lenders look at your overall debt to available credit and monthly debt to income. This ratio, called the debt-to-income ratio, is a key predictor of maximum mortgage approval. Lenders typically look for a debt-to-income ratio of less than 30%. 

The amount owed in debt makes up 30% of your credit score. Reducing outstanding debt, especially credit card debt, can help increase the chances of mortgage approval. 

Save for a Larger Down Payment 

A larger down payment can improve your chance of mortgage approval or better interest terms. If you have a larger down payment, you’ll have more equity in the home upfront, reducing the lender’s risk and increasing your mortgage options. 

Provide Proof of Income and Stability 

Showing lenders that you have a steady income and stable employment can help increase your chances of mortgage approval. Lenders typically look for borrowers with at least two years at the same job and a salary that is stable or increasing. 

Get a Co-Signer

Having a trusted family member or friend with a good credit score cosign the mortgage loan with you can increase your chances of approval. Of course, this also means they’re liable for mortgage payments if you fail to pay. But if they’re willing and you’re confident you’ll be able to make payments, this can be the most effective way to increase your approval chances. 

Final Tips for Securing a Mortgage

In addition to building your credit score and history, you can consider becoming an authorized user or using a rent reporting company for a quick credit boost for past on-time payments. Research lenders and remember that you can always negotiate. Work to strengthen your file from as many perspectives as possible to increase your chances of approval with more favorable terms. Need more mortgage options? Find the best mortgage lenders for poor credit here. 

Frequently Asked Questions