Bad Credit Mortgages: Finding the Best OptionBad credit mortgages are available, if you are working on improving your financial circumstances. In the last two years, lenders have tightened up their lending requirements in the hopes of avoiding some of the foreclosure problems that have plagued the industry in that timeframe. Prior to this, bad credit mortgage loans were more readily available. Today, this is not the case.
Can I Get a Loan?
Most people simply want to know if they can get a mortgage loan. With bad credit, you will need to prove that you can pay for your investment in that home. In other words, you need to ensure that you have the means to make your monthly payment and you need to be able to prove that you are working to improve your credit score.
- Are you able to pay down any of your debt? This could help to show that you are living within your means and working towards improving your credit score.
- Are you using credit cards heavily? If so, this signals to the lenders, even mortgage lenders, that you may not be able to handle the larger debt repayment of a mortgage.
- Do you have experience with mortgages or other secured loans? If you have held a mortgage in the past and you have managed it well, you are more likely to qualify for a new mortgage even though you have poor credit.
- Do you have steady employment? In order for you to actually make your monthly payments, you need to have a job. Showing that you have a job and that that job is a steady one, will improve your ability to obtain a poor credit mortgage loan.
- Do you have enough income? There is a difference here in income and employment. You need to be making enough money to pay all of the other debt obligations you have and also be making enough to cover the costs of a mortgage. These are questions that lenders will ask of you.
How to Find Lenders
Those who have poor credit do have a harder time of finding lenders. However, there are ways to get a loan.
- Consider FHA loans. The FHA helps to provide insurance your loan, which means that more lenders will be willing to work with you. Any FHA approved lender can help you to qualify for an FHA loan. However, keep in mind that there are requirements on these loans.
- Have a large down payment. If you have a large down payment, of 20 percent of the purchase price of the home or more, you give more assurances to lenders. In short, you are less likely to walk away from a home that you put a lot of money into to start with.
- Shop around. There are still lenders that will work with you. There are even lenders who specialize in bad credit mortgage loans. In many cases, national lenders are the best route to take.
As you can see, a bad credit mortgage loan is harder to get, but there are options. Take the time to compare several lender before making a purchase.
