How to Obtain a Mortgage With Bad Credit
Obtaining a mortgage to purchase a home is difficult but not impossible with bad credit. Many variables come into play when reviewing a bad credit history and determining if a person will qualify for a mortgage. A low credit score does not rule out a mortgage rather the number of outstanding collections and recent negative history. Being proactive and beginning to repair your negative credit history will help you obtain the mortgage you desire.
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Instructions
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Save money. Obtaining a mortgage with bad credit will require you to have a down payment in most cases. The larger your down payment, the more favorable a financial institution will respond.
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Pull a copy of your credit report from all three credit reporting agencies. Annualcreditreport.com allows consumers to pull one report, per agency, per year at no charge.
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Check the information the credit reports carefully for any errors. Dispute any errors you find on the report by sending a letter to the credit agency in question. An error can be an incorrect balance, incorrect account type, incorrect dates or any other information that is not displayed accurately.
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Review the reports very carefully. Make three lists: negative amounts owed, negative paid off and positive account. Write the amount down for each negative account that has a balance owed. Write a reason for all of the negative accounts that are paid off. A loan officer will require an explanation of why you have a negative account. Write a list of the positive accounts you have.
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Look at the list with the amount owed. You cannot get a mortgage with any outstanding amounts owed. The exception to this, in some instances, is medical accounts. Do not pay any medical accounts until you have spoken with a loan officer. For any amounts owed for accounts other than medical, write letters to the creditors offering to settle the account. Do not tell the lender you wish to purchase a home as the lender is aware you must pay the amount in full to obtain a loan. Settle as many debts as possible.
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Visit a mortgage loan officer. A real estate agent can put you in touch with a loan officer or you can contact your local bank or credit union. Let the loan officer review your financial information and advise you of additional steps. If your positive credit history is weak, he may advise you to spend more time building a positive credit history and revisit in a few months.
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Act on the steps given to you by the loan officer. The loan office is the person who will know your exact credit situation and will know the exact steps required to take. This may involve getting detailed information on the negative accounts you have, saving the appropriate amount of money for a down payment, building new positive credit or you may be ready to move forward with selecting the house you wish to purchase.
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Tips & Warnings
No matter how bad your credit situation is, you can be proactive and work to build positive credit.
References
Resources
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