How to Obtain a Mortage Loan With Bad Credit
If you have a bad credit score, you may believe that obtaining a mortgage is out of the question. However, if you are working on rebuilding your credit, you can usually find a lender that will sell you an affordable mortgage. The hardest part of this process is finding a legitimate lender that is not out to financially strap you.
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Instructions
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Find a lender that sells subprime mortgage loans. There will most likely be one in your area, though you can also purchase one from an online bank.
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Search for a bad credit mortgage loan. This type of loan has a higher rate of interest than prime mortgage loans, which means you will pay more per month.
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Compare the interest rates of various bad credit mortgage loans. Calculate the annual percentage rate (APR) for each loan to easily compare them. See Resources for a website that will calculate your APR based on your loan information.
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Copy records of your tax returns, bank statements and any other financial records in preparation for your prequalification appointment. You'll especially want to demonstrate to your lender if you have other major payments, such as tuition or child support, since they may persuade your lender to lower your interest rate.
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Go to the bank that sells the loan with the lowest APR and set up a prequalification appointment with a mortgage officer. Be upfront about your bad credit history, and have your records ready for the specialist to inspect.
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Pay the highest down payment you can afford on your mortgage. Doing this will significantly lower your interest rate.
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Tips & Warnings
If it is not urgent for you to purchase a mortgage, work on rebuilding your credit first. The simplest and most effective way to rebuild your credit is to pay your credit card bills on time. Obtain your credit report before you search for mortgages. Since your lender will scan your report, you'll want to check it for any mistaken charges you can remove.
Watch out for lenders who charge exorbitant mortgage fees and interest rates. The following items are flat-out scams: a loan that has an interest rate higher than 8 percent, a loan that requires a title and a loan that requires extremely high monthly payments.
