Does Rocket Mortgage Work With Bad Credit? (Feb. 2024)

Does Rocket Mortgage Work With Bad Credit

If you are searching for a new house but have lousy credit, you aren’t alone. Rocket Mortgage may be a solution. It is America’s largest direct mortgage provider, and it works with borrowers of every credit stripe. 

Rocket Mortgage’s RateShield® program freezes the current mortgage loan rate for 90 days. In addition, the lender may help with your down payment and closing costs.

This article explores what Rocket Mortgage offers and reviews several alternatives that may provide you with a mortgage despite imperfect credit. 

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Rocket Mortgage Accepts Borrowers Who Have a Median 580 FICO Score

Rocket Mortgage accepts borrowers with a minimum credit score of 580, which lenders consider to be “fair” credit. According to the Experian credit bureau, 91% of consumers have FICO scores above 579. This makes Rocket Mortgage a loan source for most consumers.

By welcoming subprime borrowers, Rocket Mortgage serves consumers who may not be eligible for loans from stricter lenders. The lender may offer you a government-backed or conventional loan option even when your credit is less than ideal.

  • America’s largest mortgage lender
  • The entire process is completed online
  • Options for new mortgages and refinancing existing mortgages
  • Award-winning customer service and cutting-edge digital platforms
  • More than 90% of clients would recommend us
  • See application, terms, and details


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1985 5 minutes 9.5/10

Rocket Mortgage is a flexible lender. It is willing to consider your entire financial situation, not just your credit score. In this way, Rocket Mortgage serves consumers with lower credit scores when most lenders won’t. This gives the lender a competitive advantage.

Getting a loan and making timely payments can help improve your credit score. Creditworthy behavior can give you access to less expensive loans.

Additional Mortgage Lenders For Bad Credit Applicants

The following mix of government agencies and a private loan-finding service may help you finance a home purchase.

  • Get today’s mortgage rates from the top mortgage lenders and banks
  • Easily compare and choose mortgage lenders with no obligations or fees
  • Review current mortgage rates side by side
  • Pick mortgage lenders that meet your specific needs
  • Compare rates from pre-qualified and approved mortgage lenders — 100% online, 100% free
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1979 4 minutes 8.5/10

eMortgage is one of the best mortgage lender networks. Rather than lending directly to borrowers, it works with a network of mortgage lenders that provide government-backed and conventional loan options.

You may receive competing quotes for a poor credit mortgage by submitting a few data items, including the loan amount, state, and credit rating. eMortgage uses 256-bit encryption to ensure the security of your private information.

  • For military veterans, service members, their spouses, and other eligible beneficiaries only
  • No down payment and no monthly mortgage insurance
  • The basic entitlement available to each eligible veteran is $36,000
  • Lenders generally loan up to 4 times a veteran’s available entitlement without a down payment
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies by Applicant 1944 9 Minutes 7.5/10

The VA-Guaranteed Home Loan Program from the US Department of Veterans Affairs guarantees mortgages for military members and veterans. You must apply for the Department’s Certificate of Eligibility (COE) to be eligible. With a COE, you can shop for guaranteed mortgages from VA-approved lenders.

A VA loan doesn’t require a minimum credit score, although its lender partners may. You can arrange a VA loan without a down payment, and these loans have fewer closing costs and no prepayment penalties.

  • Offers 100% Financing, Low rates and Affordable Payments.
  • Helps lenders work with low and moderate income families living in rural areas to make home ownership a reality.
  • Loans can be used for repairs and rehabilitation; physical disability equipment; connection fees, assessments or installment costs for utilities; and essential household equipment.
  • Loans can include closing costs and reasonable/customary expenses associated with the purchase
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1897 9 Minutes 9.0/10

USDA Rural Housing Loans can help you buy a single-family home in a rural area. A USDA loan requires consumers to have a credit score of 640 or higher. You cannot have an income that exceeds 115% of the median household income of the rural area where the eligible house resides.

The US Department of Agriculture also offers the Direct Loan Program, which helps homebuyers make each monthly payment on time. Your income must be less than 80% of your region’s median household income for you to be eligible. Direct installment loans may be available if you don’t qualify for the USDA Guaranteed Loan Program.

FHA Loans

Federal Housing Administration loans reduce the risks facing lenders who serve subprime borrowers. They do so by guaranteeing payments on eligible mortgages. The FHA loan government guarantee encourages lenders to loosen their minimum credit scores and down payment requirements.

Screenshot from the HUD website
The U.S. Department of Housing and Urban Development can help you find an FHA loan.

You must have a credit score of no less than 500 and a 10% down payment to qualify for an FHA loan. Applicants with scores of 580 or higher need to put down only 3.5%, although FHA-approved lenders can set different score requirements.

What is Bad Credit?

Simply put, bad credit is a low credit score, a red flag for lenders that you may be a high-risk borrower. Credit scores, including those from FICO or VantageScore, are usually between 300 and 850. Typically, lenders see anything below 580 as bad credit.

So, how do you end up with bad credit? It all boils down to your credit history, which includes how regularly you make payments, how much you owe, how long you’ve had credit, any new credit applications, and the mix of credit you use. How you handle your payments is essential, making up about 35% of your FICO score.

FICO score credit considerations graphic

Negative marks such as late payments, defaults, bankruptcies, and foreclosures can really drag your score down. The same goes for having a lot of debt or maxing out your credit cards.

Regarding mortgages, most lenders lean heavily on your credit score to decide if they will lend to you. A low score can make them think twice because you haven’t been the best with credit in the past. It can lead to higher mortgage rates on loans and credit cards, making borrowing more expensive. Sometimes, it can even mean getting a flat “no’” when you apply for credit or loans.

But bad credit impacts more than borrowing. It can ripple into other parts of your life, such as renting apartments, what you pay for insurance, and even getting specific jobs — especially those that involve handling money.

Fixing poor credit is a process. It’s about paying your bills on time, chipping away at debts, only jumping into new credit accounts if necessary, and sorting out any errors on your credit report. Building credit takes discipline and patience, but it’s worth it. Improved credit opens doors to better borrowing options and financial opportunities.

How Does Bad Credit Affect Mortgage Access?

Lousy credit can throw a wrench into your plans when looking for a mortgage. It’s not just about whether you’ll get approved; it also affects the terms and costs of the loan. Think of it as trying to run a race with a heavy backpack — it makes everything more challenging.

Here’s how bad credit can trip you up when you’re mortgage hunting:

  • Loan approval challenges: A low credit score reduces your chances of mortgage approval. Lenders use your credit score to estimate the odds that you’ll default on your loan within two years. The lenders in this review have more flexible credit requirements, but they are the exception rather than the rule. 
  • Higher interest rates: You’ll likely pay a higher interest rate if you get a mortgage with bad credit. Lenders must charge more to make up for the risk they take. 
  • Larger down payments: Lenders may ask for a larger down payment to lower their risk. They figure you are more motivated to pay on time if you have significant skin in the game. Some government-backed loans require a small or no down payment, but they are not available to all borrowers.
  • Stricter loan terms: Bad credit mortgages often have harsher terms. These may include shorter loan periods (meaning higher monthly payments) or adjustable mortgage rates that could rise over time.
  • Mortgage insurance requirements: You’ll need mortgage insurance if you can’t make a substantial down payment (i.e., 20% or more). Mortgage insurance protects the lender if you default, but it increases your monthly costs.
  • Limited loan options: Poor credit reduces your mortgage choices. Lenders offer lower rates and better terms to borrowers with good credit.
  • Impact on housing choices: Bad credit means you will have to deal with higher costs and fewer loan choices. You may have to settle for a smaller home in poorer condition and in a less desirable location.

These problems usually disappear when you raise your credit score high enough. To succeed, you must pay on time, reduce your existing debts, and fix errors on your credit reports. It may take a year or more, but it can save you tens of thousands of dollars in interest over the lifetime of the loan.

How Much Mortgage Can I Afford?

It’s essential to know how much mortgage you can afford before you start house-hunting. You need to examine your finances and consider several key factors to arrive at an answer.

Understanding what you can afford requires you to consider your immediate and long-term plans. Keeping your finances healthy is crucial because owning a home involves many ongoing costs beyond your mortgage payments. 

Income Analysis

Start with your monthly income. This includes your primary salary, bonuses, commissions, and other steady cash inflows. Lenders often use a guideline called the frontend ratio to see whether your total housing costs (i.e., your mortgage, property taxes, and insurance) are greater than 28% of your gross monthly income. A higher ratio may disqualify you from getting a loan.

Consider additional sources of income if your earnings are relatively lower. For example, you may want to take a part-time gig, do some freelance work, or even rent out a room. Another good idea is to reduce any of your existing debts, which will improve your debt-to-income (DTI) ratio.

Debt-to-Income (DTI) Ratio

Your debt-to-income (DTI) ratio is your monthly debt payments divided by your monthly income. Try to lower your DTI ratio before you apply for a mortgage. Include all your expenses — car loans, student loans, credit card payments — and add your expected housing costs. Then, calculate this total as a percentage of your monthly pre-tax income.

DTI ratio graphic

Lenders typically want borrowers to have a DTI ratio below 36%. However, some may extend that limit to 43% or more. You can improve your DTI by paying off some of your debts and avoiding new ones. 

Down Payment Considerations

Your down payment helps determine how much mortgage you can afford. The bigger the down payment, the less you’ll need to borrow, which can often result in better loan terms.

Most lenders recommend a 20% down payment. It’s the amount you need to avoid private mortgage insurance (PMI), which can add more than $100 to your monthly bill. But you have alternatives if you’re struggling to save for a down payment

You can apply for down payment assistance programs or consider a smaller down payment (if you can afford to pay PMI). Government-backed loans are worthwhile since they often require smaller down payments and may let others pay on your behalf.

Impact of Interest Rates

The interest rate on your mortgage directly impacts your monthly payments and how much the loan will ultimately cost you. Lower interest rates can reduce your monthly expenses. But remember, prevailing interest rates can fluctuate depending on current economic conditions.

Interest rates graphic from Freddie Mac
Even a small interest rate fluctuation could cost you hundreds or thousands of dollars on your mortgage.

You can try a couple of things if you face high interest rates. First, try to improve your credit score — doing so will increase your appeal to lenders and qualify you for a better interest rate. 

Next, compare rates from different lenders when you shop for a mortgage. Also, consider a fixed-rate mortgage, which lets you lock in your interest rate. 

Mortgage Term

The mortgage term is the amount of time you’ll need to pay off your loan — typically, it’s either 15 or 30 years. Choosing a 15-year term generally means higher monthly expenses, but you’ll save on interest compared to a 30-year mortgage.

Additional Homeownership Costs

You must take into account more than just the mortgage payments when you calculate the monthly costs of owning a home. You must include property taxes, homeowner’s insurance, home upkeep, and possibly homeowners association (HOA) fees.

How Do I Apply For a Mortgage with Rocket Mortgage?

Applying online for a mortgage with Rocket Mortgage is pretty straightforward. Before you start, ensure you have all your financial information handy. You’ll need to submit an application with your income details, bank statements, investment records, current debts, and your Social Security number.

When you’re ready, head to the Rocket Mortgage website through the link below or download its mobile app (in the Google Play Store or Apple App Store). Both are easy to use. If you’re a new user, you’ll need to create an account with your email and a password.

  • America’s largest mortgage lender
  • The entire process is completed online
  • Options for new mortgages and refinancing existing mortgages
  • Award-winning customer service and cutting-edge digital platforms
  • More than 90% of clients would recommend us
  • See application, terms, and details


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1985 5 minutes 9.5/10

Once you’re in, start the application by plugging in your personal and financial details. You’ll enter info about your income, assets, debts, and the property you’ve got your eye on. You can prequalify for a loan without impacting your credit score, but remember, this isn’t the same as a final approval.

When you formally apply, Rocket Mortgage conducts a credit check — this is standard to assess your eligibility and what interest rates you qualify for. Be ready to upload documents that may include W-2s, tax returns, bank statements, and pay stubs. Rocket Mortgage needs these to verify your income and financial situation.

Rocket Mortgage will offer you the best loan option based on your application and credit. Take your time to analyze these, focusing on the terms and rates. If you find one you like, you can lock in your mortgage rate to protect yourself from future rate hikes.

Next, your application goes through the underwriting process, and a loan officer looks everything over to make their final decision.

Upon approval, you’ll move on to the closing. Rocket Mortgage offers online closings in some places, which can streamline the process considerably. Keep in contact with your loan officer or mortgage representative  — their job is to help answer questions and keep you updated.

Remember, everyone’s mortgage experience is unique. The process varies according to your situation. Ensure you understand all the terms and conditions before signing a mortgage contract.

What Features Does Rocket Mortgage Offer?

This chart summarizes some of the significant features Rocket Mortgage offers. Remember that the availability of certain features may depend on your location and specific financial situation.

Loan TypeRocket Mortgage offers various loan types, including fixed-rate, adjustable-rate mortgages (ARMs), FHA, VA, and jumbo loans.
Application ProcessIt provides a fully online application process, including a mobile app, and offers document e-signing capabilities.
CustomizationCustomers can customize their loan terms and have options for refinancing their mortgages.
Support and AssistanceRocket Mortgage offers online loan advisors, various mortgage calculators and tools, and educational resources for borrowers.
Pre-approvalIt features a fast process and provides pre-approval letters for convenience when looking for a home.
Closing ProcessRocket Mortgage facilitates online closing options, including e-closing in specific areas.
Competitive RatesRocket Mortgage offers competitive interest rates that vary with market conditions and the borrower’s credit profile.
Credit FlexibilityIt is known to accept lower credit scores for certain loan types, particularly FHA loans, making qualifying easier for a broader range of borrowers.
Additional ServicesThe company also provides mortgage refinance options, home equity loans (in some cases), and tools for financial advice and planning.

Features change over time. Please visit the Rocket Mortgage website for the timeliest information.

Is It Hard to Get Approved With Rocket Mortgage?

Getting approved with Rocket Mortgage is a smooth process compared to some traditional lenders. But as with any lender, Rocket Mortgage looks at several aspects of your financial life. Here are the key factors it considers: 

  • Credit score: Rocket Mortgage is a bit more lenient with credit scores, especially for FHA loans. But remember, a lower credit score could mean a more challenging time getting approved and not-so-great interest rates.
  • Debt-to-income ratio (DTI): The lender will check out your DTI ratio — that’s your total monthly debt payments divided by your gross monthly income. A lower DTI makes it easier to get the thumbs up.
  • Employment and income stability: Steady employment and reliable income are big deals. Rocket Mortgage verifies your job and income to ensure you can handle the mortgage payments.
  • Down payment: Rocket Mortgage does have loans that don’t require a significant down payment. However, putting down more can boost your approval odds and even lower your loan costs.
  • Property type and value: The kind of property you desire and its market value matter. The goal is to get you a loan that’s enough for the home you want.
  • Mortgage history: If you’ve had mortgages before and handled them well, that’s a point in your favor.
  • Overall financial health: Rocket Mortgage will take a look at your broader financial picture, including savings and investments, to see if you can cover closing costs and unexpected expenses.

Rocket Mortgage is recognized for its efficient, hassle-free application, and primarily online process. But keep in mind approval isn’t a sure thing; it hinges on meeting the lender’s financial criteria.

How Does Rocket Mortgage Compare to Traditional Mortgage Lenders?

This chart highlights the differences in convenience, technology integration, personal interaction, and flexibility between Rocket Mortgage and traditional mortgage lenders.

Application ProcessPrimarily online, streamlined, and user-friendlyOften, a mix of online and in-person processes may be less streamlined
Approval TimeQuick approval process, often within minutesApproval can take several days to weeks
Personal InteractionLimited; primarily digital interactionsHigher potential for in-person interactions and personalized service.
DocumentationDigital submission of documents; less paper-basedIt may require more physical paperwork and in-person document submission
Loan Products OfferedA broad range but primarily standard loan productsMay offer a wider variety of specialized loan products
Interest RatesCompetitive rates, often comparable to traditional lendersRates vary; some may offer more competitive rates based on relationships
Credit FlexibilityMay have more flexible credit requirements (e.g., lower minimum credit scores)Often, stricter credit requirements may favor higher credit scores
Customer SupportOnline and phone support may need more personalized attention.Potentially more personalized support and guidance throughout the process
Closing ProcessOnline-focused closing processThe traditional, often in-person closing process
Local Market KnowledgeLess emphasis on local market expertiseOften have better local market insights and relationships
Accessibility and ConvenienceHighly accessible, especially for tech-savvy borrowersMay require more in-person meetings and office visits
Reputation and TrustKnown for innovation and convenienceEstablishes trust through long-standing presence and personal relationships

As you can see, Rocket Mortgage offers a meaningful alternative to traditional lenders.

Rocket Mortgage Is a Good Choice For Subprime Borrowers

Rocket Mortgage is an excellent source of subprime mortgages. It offers flexible loans and accepts low credit scores. It may be the best mortgage lender available online.

It has a smooth online application process backed by solid customer support. If you are worried that your credit will prevent you from obtaining a mortgage, contact Rocket Mortgage and get an independent opinion.

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