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How to Get a Mortgage with Bad Credit


Many people who have bad credit believe it is impossible to obtain a mortgage. While the process may be difficult, it is manageable. Many lenders are willing to work with individuals who have poor or no credit. A damaged credit rating may be due to missed payments on loans, bankruptcy, or an overload of high credit balances.

The Application Process

The process of becoming approved for a home loan is the same for those with good or bad credit. A lender checks the applicant’s credit history, income, employment history, and the amount of debt owed. The amount of available cash that an applicant has is also considered. A lender wants to work with someone who will not default on the loan.

Qualifying with Bad Credit

Lenders look for borrowers who are low risk. An individual with poor credit may need to have a considerable amount of cash and assets available. One of the best ways an applicant can be approved for a bad credit loan is by offering a high down payment on the house. A down payment of twenty percent or more will show a measure of good faith. Proof of financial stability will need to be presented. A lender will be more willing to finance a loan if an individual has a vested interest in the property being mortgaged.

An applicant can offer proof of a positive payment history on monthly bills, past mortgages, or previous rental properties. A lender will want to see that an applicant has made payments on time. Copies of receipts for payments or cancelled checks must be presented to the lending institution.

Where To Find a Lender

Lenders who specialize in financing loans for individuals with poor credit are called sub-prime lenders. When choosing a sub-prime lender, it’s important to get references in order to be assured that the lender is legitimate. Many lenders offer loans with higher interest rates to those with bad credit. The interest rate and type of loan an individual qualifies for may depend on the level of damage that has been done to his or her credit rating.

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