How to Get a Home Loan With Bad Credit & No Money Down

Home loan restrictions have gotten much tighter in recent months due to the rise in foreclosures as well as massive bank bailouts. Obtaining a home loan might not be as easy as it once was, but it is still possible to get a home loan with bad credit and no money down, even in this market. Here is your guide on how to get your home financed--even if you have challenged credit--and not have to come to the table with a dime.

Things You'll Need

• Bank statements
• W-2s
• Paycheck stubs
• Tax returns
• Co-borrower

Instructions

Try On Your Own

1. Contact a mortgage loan officer or mortgage broker. Ask her about financing requirements and documentation needed in order to qualify you for a home loan. This will entail pulling your credit, and providing proof of your income and ability to repay a loan.

2. Send your documentation to the loan officer as quickly as possible. This will allow him to begin putting a file together in order to assist you in the qualification process. This can be a rather lengthy process, but the sooner your loan officer has all of the information he needs, the faster he can begin working on your file.

3. Use non-traditional sources of credit in order to prove your good payment history. These resources include rent payments, electricity and utility payments as well as cell phone bills or cable bill payments. Go to each merchant and request a 12-month payment history to show your good payment history with each of them.

4. Write hardship letters. If your poor credit history was a result of divorce, sickness or extenuating circumstances, write down what issues you have had, as well as your plan for correcting them and how you have corrected them to date. This will help the underwriter explain some of the issues on your file and render a fair decision.

5. Talk to your loan officer about down payment assistance programs and 100 percent financing programs. Services such as NACA and USDA rural development programs can be a great source of help in getting you qualified and moved into a new home without having to spend money on a down payment or closing costs.

6. Wait on your loan decision. Once you have gotten a decision back from underwriting, you will discover if you can qualify on your own for a home loan or if you need to access a co-borrower.

Getting a Co-borrower

1. Talk to your relatives that have positive credit histories about co-signing on your home purchase with you. Most times those in your family value home ownership and want to help you make this purchase.

2. Get your loan officer in contact with your co-signer. This will begin the qualification process using your co-borrowers information on getting you into a home. The faster your co-borrower provides information and documentation to the lender will be the faster a decision is rendered.

3. Work on your own credit in the meantime. Pay off outstanding debts, continue using credit but don't open any new accounts. This will show that you are continuing to work on a positive payment history, even though you have brought a co-signer into the picture.

4. Work with first time buyer advocacy programs in your state to find out about the different down payment assistance programs and $0-down programs available. Get educated on which one is the best for you. If you don't qualify for these programs as your relatives to gift you money for your down payment and roll your closing costs into your loan to get that $0 dollar move-in.

5. When approved with a co-signer go find a house as quickly as possible and work on getting it closed in 30 days or less. A real estate professional can assist you with this much faster than attempting this on your own.

Tips & Warnings

• Expect the home buying process to take longer when you have challenged credit. Be honest with your loan officer.

• Don't commit mortgage fraud, this comes with serious penalties.