How to Repair a Credit Mortgage

Secure a mortgage with credit challenges.

Credit struggles can be frustrating when applying for a mortgage. Fortunately, some lenders offer mortgages to people struggling with credit issues. When shopping for these mortgages, it's important to be careful about securing the best interest rate and watching out for fees. After making timely payments on your mortgage, lower interest rates will become available to you.

Difficulty:

Moderate

Instructions

1. Run your credit score. Before shopping for a mortgage, it's important to request a recent credit score. Most lenders use risk-based lending. The lower your credit score, the more you will pay for a mortgage. Resources, such as Annual Credit Report, allow you to get access to a credit score from all three bureaus: Equifax, Experian and TransUnion.

2. Check out FHA financing. FHA mortgages are backed by the Federal Housing Administration. This loan program was created to give more people access to mortgages. The qualifying criteria and credit score requirements are more lenient than conventional mortgages. For example, with an FHA Loan, you can have a credit score as low as 620.

3. Apply for mortgages with private lenders. Private lenders are groups of investors who pool resources to make loans. Some private lenders specialize in making high-risk loans. Talk with a loan broker to locate private lending options in your area.

4. Contact local credit unions. Credit unions usually make local lending decisions. This means you can talk with a branch manager and present your case. Show proof that you've been making timely payments on current debt obligations. Special circumstances that lead to credit challenges, such as health issues or job losses should also be discussed.

Tips & Warnings

• If you have a recent bankruptcy or foreclosure (within the past two years) you need to wait to apply for FHA financing. You will be eligible after the two years have passed.

• Don't forget to compare mortgage fees. If you have credit challenges, mortgage interest rates will be higher, but you also need to watch out for fees. Certain closing costs, such as processing fees, can be negotiated. Focus on negotiating fees that are handled in-house by the lender. Ask the lender to reduce or waive the fees.

References

• MSN Money: What Bad Credit Really Costs You
• FHA Loans: Qualifying Summary

Resources

• Bank Rate: Compare Rates
• Annual Credit Report: Find Credit Scores