The Facts About Bad Credit Mortgage Loans
Written by: Martina Hargrove
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With Careful Planning, You Can Obtain a Mortgage Even If You Have Bad Credit
If you happen to have less than average, or even bad credit, mortgage loans may be the one financial transaction you considered to be an unattainable goal. However, with careful planning and some thorough research, it is feasible to obtain a mortgage loan and become a homeowner even if your credit is less than desirable.
Get a Copy of Your Credit Report
The first step, obviously, is to obtain a copy of your credit report. While you aren't given your actual credit or FICO score, which is the mathematical configuration lenders and creditors use to ascertain your past and future credit worthiness, you are still able to see everything else related to your credit. This will include notations of late or no payments, bankruptcies, accounts that were charged off by the lender due to non-payment, as well as how many accounts you currently have, and through what lenders.
Resolve Disputes on Your Credit Report
Make sure there are no disputes on your credit report, and if so, contact the company in question to resolve the issue before attempting to apply for a mortgage. All three major credit bureaus have information regarding resolving disputes, and how to go about correcting errors.
Make Timely Payments for at Least 3 Months Prior to Applying for a Mortgage
Try to improve your credit rating for at least three months prior to shopping for mortgage loans. Make every payment on time, paying more than the minimum due, if possible, and do not apply for any more lines of credit, such as taking out a car loan or applying for a credit card. Even if you aren't approved, the fact that you applied is still noted on your credit report. Too many inquiries put up a red flag to lenders and increase your chances of being considered a credit risk.
Deal with a Broker That Specializes in Bad Credit Mortgages
There are numerous mortgage brokers, advisors, and counselors who specialize in bad credit mortgage loans and finding the best ways for those with a less than stellar credit history to become homeowners. As one would expect, a negative credit rating will increase the price of everything, from the interest rates, to the fees and costs associated with applying for and having a mortgage loan. However, other unsecured debts such as personal loans or credit cards may come with even higher interest rates, and could be added into the total cost of the mortgage loan, consolidating your debt into one more manageable payment.
Also, there are several non-profit credit counseling services and those that are funded by the federal government who provide helpful information about bad credit mortgage loans, and offer alternatives and solutions for those having financial difficulties. They may help one find ways of improving their finances and repairing their credit, opening up the possibility of being approved for a conventional loan through a bank.
Subprime Loans
For those with truly bad credit, mortgage loans, at least in the conventional sense, may not be a viable option, and instead may want to consider applying for a subprime loan, which like other loans, have many different terms and conditions that should be closely inspected and understood. Be aware that interest rates associated with subprime loans may be as much as five or six percent higher than loans considered to be "prime."
Even if you are leery about your financial history and feel that a bad credit mortgage loan is the only option you have available, still take the time to shop around for the absolute best deal for your individual circumstances, and also educate yourself regarding the many facets of loans and mortgages.
