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6 Tips For Getting A Mortgage Loan With Bad Credit

6 Tips For Getting A Mortgage Loan With Bad Credit


If you have bad credit, getting a mortgage can seem impossible. It’s not easy to get a loan when your score is in the low 500s—or even high 400s. But while it may take some extra work, it is possible to find a lender who will look past the errors on your credit report or problems in your financial history and give you the thumbs-up for a new home loan. You just need to know where to look and what steps to take to start borrowing money again.

Save up some cash.

A down payment is the money you put towards your home purchase, and although it can be as small as 3% of the cost of your home, it’s not uncommon for lenders to require a 20% down payment for borrowers with bad credit. This can be an issue if you’re trying to buy a house after going through bankruptcy or foreclosure.

If you don’t have enough savings to cover closing costs and other expenses associated with buying a house (like taxes), then you’ll need to save up more money before applying for a mortgage loan.

Get pre-qualified.

Pre-qualification is a process that allows you to see what kind of mortgage amount you can get based on your income, assets, and debt. You’ll need to provide information about your employment history, credit score, and monthly expenses. The lender will also want to know the value of any home you’re trying to buy so they can determine the size of the mortgage loan.

The benefit of getting pre-qualified is that it gives you peace of mind in knowing how much home buying power you have before making an offer on a house. It ensures that there won’t be any surprises at settlement when it comes time for closing. Another benefit is that once pre-qualified by one lender, other lenders often follow suit because they want their customers approved as quickly as possible without having too many questions asked during underwriting (the process after qualification).

Apply for a joint loan.

A joint loan can be another good option, but you’ll need to have a good credit score in order to qualify. If you’re applying for a mortgage with someone who has bad credit and they’re going to be named on the loan, they’ll have to have enough income or assets that will cover the full amount of their monthly payment if you can’t pay it. The same goes for any other type of debt—if your partner is going to use their name as collateral on something else like an auto loan or credit card bill, then they will also need sufficient income or assets.

Use nontraditional lenders.

While you’re looking for a mortgage loan with bad credit, consider using nontraditional lenders. Nontraditional lenders specialize in providing loans to borrowers with low or poor credit scores, which can give you a better chance of getting approved than if you went through your local bank. Also, look for lenders who offer loans that are not backed by Fannie Mae or Freddie Mac. These government-backed loans tend to be more stringent when it comes to qualifying standards, so they may be more difficult for borrowers with bad credit scores and scores on other measures such as income and employment history.

Another option is to seek out private mortgages from alternative sources like peer-to-peer lending websites (which connect people who need money from investors who want a return) or online lenders that offer high interest rates but are willing to work with customers with less than perfect finances.[4]

If all else fails, consider finding cheaper alternatives until your financial situation improves enough so that you qualify for traditional financing options.[5]

Look into government programs.

Government programs can provide a lifeline to those with bad credit. These programs will help you get approved for a mortgage loan if you qualify, even if your current financial situation isn’t ideal. For example, there are government-backed loans through the Veteran’s Administration (VA), or USDA Rural Development loans and loans from FHA. The VA program is ideal for veterans who may have served in combat and suffered from PTSD or traumatic brain injury, as well as servicemembers who were discharged under other than honorable conditions.

Veterans that qualify for these types of mortgages should look into getting pre-approved before they start shopping around for houses; this way they will know how much money they have available to spend on a home before looking at properties in person. It’s important to remember that though government programs don’t require down payments (like conventional financing does), they still require funds upfront just like traditional mortgages do—so have some savings set aside before applying!

Another thing veterans should note is that there are certain lenders who specialize in helping borrowers obtain VA loans; this means they understand the process better than others and may be able to get you approved faster! Look up local lenders near where you live by visiting [this website](https://www.huduser .gov/portal/HUD/program_offices/)and searching for “VA Lenders” along with your state name–you’ll find several options under each one listed here!

Pay your bills on time.

Paying your bills on time is a great way to build credit. You can also help improve your score by keeping your credit card balances low and not opening any new lines of credit. You should also avoid closing old accounts, since that will negatively impact your overall ability to pay back debt.

If you have several old credit cards with high interest rates, it may be worth considering consolidating them into a single card with a lower rate. If you do decide on this option, make sure you monitor the terms of the new card; if the issuer offers an introductory 0% APR offer but doesn’t offer it indefinitely, be prepared for higher interest rates down the road.

If you have bad credit, it’s not impossible to get a mortgage, but you will likely have to look at nontraditional lenders and alternative loan programs.

If you have bad credit, it’s not impossible to get a mortgage, but you will likely have to look at nontraditional lenders and alternative loan programs.

Nontraditional lenders are those that don’t abide by the same regulations as traditional banks or other financial institutions. For example, these types of companies might be more willing to lend money to someone with poor credit than your typical bank would be. They usually offer higher interest rates and stricter terms than what you’d find from a bank or credit union—but that’s because their business model involves taking on more risk for the sake of profit.

Alternative loan programs are designed specifically for people who might otherwise be denied funding because of their poor credit scores or history of late payments (such as homeownership counseling). These may include down payment assistance loans or even private mortgages.*


As you can see, there are options out there for people with bad credit to get mortgage loans. Although the process will be more difficult and take more time, it’s possible to get a mortgage loan with bad credit if you make the right preparations.