Finding Mortgages for Bad Credit

Many people are looking for mortgages for bad credit. This is increasingly so because of two factors. The first is that current financial realities have caused some consumers to experience drops in their credit score, making it less possible for them to qualify for a traditional mortgage. And secondly, there are more houses available on the market today that were foreclosed upon in the past year, which some people believe can be purchased for lower prices.

Before you move forward with pursuing the purchase of a new home and undertaking a mortgage, be sure you can afford it. Are you steadily employed? Is your job relatively secure? Are you able to meet your monthly obligations now? Will you be looking for a mortgage payment that is equal to the amount that you are currently paying in rent? If not, make sure you will have the income to cover the extra monthly obligation. And keep in mind the additional expenses that come with owning a home. These include taxes, homeowners’ insurance, utilities that you may not be paying now and upkeep and maintenance of your new home.

The next step is to take a look at your credit score and report. Make sure it is accurate and work with the credit agencies to fix any errors. A general scale to determine how your credit score will impact your ability to obtain a new loan looks like this:

760 – 849 Excellent
700 – 759 Great
660 – 699 Good
620 - 659 Fair
580 - 619 Poor
500 – 579 Very Poor

The lower your score, the more difficult it will be to get a home loan, and the higher your interest rate will be.

Four types of home mortgage programs to check out are sub-prime lenders, conventional mortgage lenders, mortgage brokers and government-backed programs.

Sub-prime lenders are those finance companies and lending institutions that specialize in working with and lending to consumers who have below average credit scores or troublesome credit histories.

Conventional mortgage lenders are those housed within your local banks, credit unions and financial institutions. Some are locally owned and some are part of larger chains.

Mortgage brokers work with a number of lenders and may be able to recommend a lender that is best able to meet your needs.

Government programs are also able to help home buyers who have less than stellar credit. Consider looking into the FHA program which is available through banks and lending institutions.

Even if your credit is not where you would like it to be, if you think you can afford to purchase a home, check out the various options available to people who have less than perfect credit.  There are still some bad credit mortgages out there if you are willing to make the extra effort to find them.  If you already own your own home but need to refinance to obtain debt relief, you may also be able to get a bad credit remortgage on your home.