What NYC Real Estate Programs Let You Borrow Money With Bad Credit?

It's possible to get a mortgage even with bad credit. Find out which programs help you buy your first home with bad credit and other tips on how to improve your chances of qualifying.

If there’s one thing that most people in New York City know, it’s that life happens.

Even if you have the most stable background, there are weeks or months when things just go upside-down.

Budgets get strained, payments on bills get delayed, and your FICO score gets a ding.

The problem with trying to get real estate in New York City is that this can make it hard to actually get approved for a loan that you can afford.

Thankfully, several programs can help potential homeowners get the kind of help they need.

Borrowing Money With Bad Credit

  • A credit score under 600 is considered to be bad by most mortgage lenders, but some may consider anything under 660 poor.
  • Government-backed loans such as FHA or VA loans are your best bet for low credit.
  • FHA and VA loans are ideal for first-time homebuyers who want to put very little down but may not have good credit.
  • The Fannie Mae HomeReady and Fannie Mae HomePath Loan Programs may be an option for those with a minimum score of 620.
  • The Fannie Mae programs benefit those with less than stellar credit but want to put little down and not necessarily purchase a primary residence.
  • If all else fails, you can try to increase your downpayment or take the time to improve your credit score.

What’s Considered to Be a Bad Credit Score for Home Loans?

This can be a little varied, depending on which lender you ask.

For the most, anything that is under 600 is considered to be very bad credit by mortgage loan officers.

Many lenders will also consider anything under 660 to be poor credit, depending on what kind of loan you’re asking for.

Real Estate Loan Programs for Bad Credit

Though there are a lot of hoops to jump through when you’re trying to get loan approval, you shouldn’t get discouraged by a bad credit score.

These programs below can help you get that home in New York that you’ve always wanted.

FHA Loans

FHA loans are considered to be the standard when it comes to getting a home without good credit.

FHA loan programs are sponsored by the government in order to make homeownership possible for people who are new to homeownership or just need a hand in getting approval.

There’s a lot of reason to consider getting an FHA loan.

FHA loans only require a down payment of 3.5% for approval, and while you may have to pay 1.75% mortgage insurance, the initial startup cost is far less than traditional loans.

What do I need to qualify for an FHA loan?

Qualifying for an FHA loan is fairly simple. Here’s what you need to qualify:

  • 580 Credit Score. This is the absolute minimum you need in order to get an FHA loan at 3.5% down.
  • 500 to 579 Credit Score. If you are willing to increase your down payment to 10%, then you can qualify with a credit score this low in New York.
  • Debt-to-Income Ratio Under 43%. This is a must across the board.
  • Steady Income and Proof of Employment. This is another unshakeable requirement.
  • Home Must Be Your Primary Residence. So, no, you can’t buy a winter home in New York City with an FHA loan.
  • Down Payment Must Be Your Own Money or a Qualified Gift. You can only get gift down payments for a home via a family member, friend, charitable organization or other qualified giver.

Fannie Mae HomeReady Program

If your earnings about average for the neighborhood that you want to move into, another option on the table is the Fannie Mae HomeReady Program.

This program is more popular in the suburbs than it is in cities, but it still works wonders for people who qualify.

What do I need to qualify for Fannie Mae HomeReady loans?

Qualifying for a Fannie Mae HomeReady loan is a little harder than an FHA loan, but it’s still absolutely doable.

Here’s what you need to have in order to qualify:

  • 620 Credit Score Minimum. This is a little bit more than what an FHA loan may require, but it’s still very doable for many families in New York.
  • 3% Down Payment. This is even more affordable than FHA loans. Imagine that!
  • No More Than 50% Debt to Income Ratio. This offers more flexibility on debts, which is a huge perk for borrowers that feel the Big Apple pricing squeeze.
  • First Time and Repeat Home Buyers. You don’t have to have this be your first home to qualify.
  • Doesn’t Have to Be Your Primary Residence. If you’re looking to buy an apartment as an investment or vacation home, that’s okay with this program.
  • Few Limits on Gifted Down Payments. There are very few limits on who can give you the cash for your down payment through this program.

VA Loans

If you are a veteran, you might also be able to qualify for a low credit mortgage loan through the VA program.

This program offers home loans with no money down to all servicemen and women in America’s armed forces.

What do I need to qualify for a VA loan?

VA loans are notoriously forgiving when it comes to qualifications.

Here’s what you need to know:

  • Must Be a Veteran. If you are not a veteran, you cannot get these loans. You have to be active duty or honorably discharged to qualify. Spouses who of deceased service members and people who spent six years in the National Guard also qualify.
  • No Minimum Credit Score. The VA program doesn’t create a minimum for loans. However, lenders who are VA participants do. Most will require a 620 to approve you.
  • No Down Payment. Great, isn’t it?
  • 41% Debt to Income Ratio Maximum. This can be a little tricky in certain areas, but it’s doable if you are good with your finances.

Fannie Mae HomePath Loans

Another offering for Fannie Mae fans is the HomePath loan program.

These are specialized loans that are only available for homes that are deeded to Fannie Mae as a result of foreclosures.

This is a good way to get a cheaper home without a high credit score.

What do I need to qualify for a Fannie Mae HomePath loan?

Aside from finding a qualifying home, you will also need to have to meet these requirements before you can plunk down cash:

  • 620 Credit Score Minimum. Like HomeReady loans, a 620 is the bare minimum you can have to qualify.
  • 3% Down Payment. For many homebuyers, a 3% down payment will be as low as you can go.
  • An REO Home or A Low-Income Home. You will need to select an REO (foreclosed) home that you want to renovate and buy through this program. Part of your loan will go to appraisal and renovation costs. If you are not going the renovation route, you must select a home that’s ready to move in.
  • Doesn’t Have to Be Your Primary Residence. If you are going for the HomePath Renovation offer, you can fix and flip your home. Standard HomePath offers are for primary residences.
  • Stable Employment Is Mandatory. You will also have to prove your employment to your bankers.

New York Mortgage Assistance Programs

Once you’ve been pre-qualified for a mortgage loan, you’re going to have to show that you have the goods you need to be able to actually get approved for the loan.

When you’re at this stage, you will need more paperwork as well as proof that you can push through with the loan.

Though mortgage lenders often have their own special deals that can help with the pre-approval aspect of lending, these aren’t official programs.

These city-specific programs can help buyers get into good graces with lenders.

SONMYA Programs

There are multiple mortgage programs that are available through the SONMYA homebuying assistance programs.

SONMYA loans are known for being extremely low-interest and for having lower down-payments than most other mortgages.

Moreover, they also are known for being more accepting of low-income families.

If you have been having a hard time getting approved due to your low income, applying for a SONMYA mortgage might be able to yield a better result.

Most of the loans are given to first-time homebuyers, so if this sounds like you, you have a good shot at getting approved.

HomeSmart NY

Are you feeling lost?

Do you keep trying to get pre-approved or pre-qualified, only to have a pile of rejection letters build up on your desk? It happens, and when it does, you might be wondering why it’s happening.

It often deals with some minor issues you might not be aware of during the homebuying process.

HomeSmart NY is a specialty program that offers up free homebuying education to anyone who’s looking to buy property in New York City.

Along with the basic information you need to know about buying a house, HomeSmart lets loose the details about what lenders look for in the pre-approval and pre-qualification processes.

You don’t have to go to live counseling to benefit from HomeSmart NY.

The group boasts a nice online homeownership class too. Once you’re done with the 3.5-hour class, you get a free hour of counseling to help you get your priorities in order.

HUD Housing Counseling

The NYC HUD has been an ally of homebuyers and renters for as long as it’s been in action.

If you’re feeling lost about your pre-qualifications or just want to know what to expect when you start applying, you can talk to a counselor for free.

Some of the advice they can offer includes programs that can help you get a better mortgage, what you can do to boost your pre-approval chances, and what you should know about your purchasing power once you get the lender.


The most important thing you can do when you’re trying to get approved for a mortgage is to clear up your finances.

The better your funds are managed, the better off you’ll be. That’s why it’s a good idea to look into financial education services provided by the state.

MoneySmart is a program that is geared towards helping New York locals get their financing together. They offer classes that help you understand your credit score, lower your debt, avoid financial penalties, and more.

If your rejection letters mention high debt or a low FICO score, MoneySmart will give you the knowledge you need to get approved later on.

Credit Where Credit Is Due

A person’s credit score is usually one of the most common causes for application rejection, but it doesn’t have to be that way.

Credit Where Credit Is Due is an organization completely and utterly devoted to helping people fix their credit scores.

Though they’re not local to NYC, they’ve been known to help New Yorkers for years.

From teaching potential buyers how credit is calculated, to helping them dispute their information with the credit bureaus, Credit Where Credit Is Due can be a vital tool in your quest to get the help you need.

Neighbors Helping Neighbors

This is astrictly local organization that’s all about New Yorkers helping their neighbors navigate the stressful and often-confusing maze that is buying a home.

Their most popular service is housing counseling, which is available for both renters and potential homebuyers alike.

NHN remains a popular organization for just about every major issue that comes up in the New York City housing world.

It’s worth a look-see if you haven’t checked them out already.

What Should I Do If I’m Rejected for Bad Credit Mortgage Loans?

Though you might have the qualifications required for your loan, there are still moments where you could end up getting rejected by lenders.

This can happen for a variety of reasons and it’s not something you should be too concerned about.

Even if you got a lot of rejections, there are some things you can do to boost your chances of qualifying.

These include:

  • Applying with other lenders. These programs work with a multitude of lenders, and each lender can approve or reject your application at their own discretion. One might say no, but another may say yes. You never know.
  • Increase your down payment. Yes, this may put your home buying timeline on the skids, but adding more cash to your down payment is a good way to get what you want.
  • Take time to improve your credit. Using a credit repair service or disputing negative marks on your own can dramatically increase your credit score. It’s worth a shot.
  • Seeking out another loan program. Though these are the best programs that are out there for low credit buyers, there may be others out there.
  • Reaching out to nonprofits. New York City also has a number of nonprofits that work to help locals get help with the real estate world. You can find them by reaching out to each borough’s HUD department.

Increasing your down payment

For many potential home buyers, increasing your down payment to a qualifying level can take months or even years.

Thankfully, New York has a way of easing the burden through the HomeBuyer Dream Program.

This is a special deposit-matching program that is offered through the Federal Home Loan Bank of New York.

Qualifying recipients will have their contributions to their account matched four times over, as long as they participate in home purchase counseling sessions and can furnish proof of income.

If you’re looking to beef up your closing costs, their escrow accounts and matching programs can help immensely.

The number of people who can qualify for this program is limited annually, so if you want to get in, it’s best to do it as soon as possible.

A Final Word of Encouragement

Believe it or not, there are a lot of New York City families out there who have gone through the same struggles as you’re going through right now.

Even if you haven’t always been able to pay rent, you still have a shot at homeownership.

Don’t give up on your dream. With a little work, you can make it happen!

Ossiana Tepfenhart
About the author

Ossiana Tepfenhart is a writer for PropertyNest and writes on all things New York City real estate.