Getting a bad credit mortgage loan can be a troubling process, especially if you happen to know other people with good credit that also have mortgages. Like it or not, if you have bad credit you will end up having to pay a higher rate of interest and probably higher monthly payments. Further, your lender is likely to look over your credit history in detail, which can be very embarrassing. Here are three tips for people seeking bad credit mortgages.
Use a broker
For people with excellent credit, a stable income, and great collateral, many of the best mortgage loans are to be found with their banks or other institutional lenders. However, for people with bad credit, the market is more difficult. In this case it is better to go through a bad credit mortgage broker as opposed to your bank. Every mortgage you apply for and fail to get is held against you in your credit report, so it is important not to apply to places likely to turn you down. Assuming you are direct with a mortgage broker and explain your real circumstances, chances are the broker will know where to go to get the best deal for someone in your situation. They are used to working with bad credit mortgage lenders and can guide your through the process. Further, since the broker does not get paid until you get your loan; it is very much in their best interest to find a lender for you.
Shop around
Believe it or not, most major lenders do have bad credit mortgage programs, especially since the collapse in 2008. Not only are there many options to choose from, but they are all very competitive with one another. However, since the “conventional wisdom” suggests that it is very difficult for people with bad credit to get a mortgage, most of these lenders are hoping for people that just jump on the first bad credit mortgage lender they come across. This is a mistake. Doing some of your own shopping around or requiring your broker to find multiple offers can save you a lot of money. As long as you have, and can prove that you have, a stable income adequate to make your monthly payments, you can get a mortgage regardless of your credit. (Assuming you have sufficient funds to put down.)
Investigate the lender
Since many people seeking bad credit mortgages are financially vulnerable, there are always a number of predators out there seeking to take advantage of them. Once you find a potential lender whose offer seems acceptable, take a little time to look into the firm and make sure they have a good track record. Just a simple online search of the company and its leadership (CEO, FCO, etc.) will pull up any news stories related to the company. Similarly, you can look on the website of the Better Business Bureau for complaints, your state’s attorney-general’s website about lawsuits or criminal investigations, or that of the IRS and SEC. You are basically looking to make sure that the lender does not have a track record of complaints, lawsuits, or other problems. If they do have such a record, you may want to think twice about dealing with them.
Obviously, it is always wise to work to repair your own credit prior to applying for a loan. Stay tuned and we will teach you how!
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