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Getting Home Loans With Bad Credit. A Survival Manual
By EchoBay Loans Staff Writer

There's nothing quite as embarrassing as having an arrogant mortgage broker tell you that there is no way you will be approved for a mortgage due to your poor credit. After it happens, pick yourself up and brush it off. The guy is right in one aspect; you won't be approved for a home loan with his company, but there are a number of sub-prime lending institutions that specialize in helping people with less-than-perfect credit purchase a home.

Bad credit home loans are not as hard to find as one might expect. There's no secret doorway to the world of sub-prime home loans; the information is readily available for people who are looking for it.
The hard part isn't finding the home loan that you can qualify for, but in understanding how you can help yourself qualify for a home loan and how to apply once you have your ducks in a row.

You're going to want to do your homework before applying with a lender or broker. The more knowledge you have and the better prepared you are, the easier the application and approval process will be. To do this, you're going to need to obtain a copy of your credit report. This can be done online or by contacting the three individual credit-reporting agencies by mail. Also request your credit score, which is the number that lenders generally rate you by.

Once you have the information from the credit reporting agencies, go over the reports to make sure there is no inaccurate information on your report. For instance, if your report shows that you owe on a bill that you paid off six months ago, or if it shows you were delinquent when you really never were, getting those items off of your credit report will increase your credit score as well as your chances of being approved for a mortgage.

When cleaning up your credit report, be careful not to fall victim to the agencies who promise to remove all the negative information from your report for a hefty fee. Legally, there is no way for them to remove all of the legitimate negative information from your report. You can accomplish the same results by contacting the credit reporting agencies yourself.

Once your credit report reflects current information and your credit score is accurate, you're ready to begin the process of applying for a home loan. If your credit score is below 600, you're most likely going to have to finance with a sub-prime lender. The lower your credit score, the higher your interest rate will be and the more cash on hand you are going to need for a down payment. If your credit score is around the 550 mark, you're probably going to need to put 20 percent of the purchase price down on the home.

If you have limited down-payment reserves available, don't be too shy to tell the lender you are working with about your concerns. Many lenders can help you find creative financing options that will enable you to get into a home with a smaller down payment. Another option for purchasing a home with little out-of-pocket expense is by obtaining an FHA mortgage.

With an FHA loan you'll only need to put down three to five percent of the purchase price, and some of that can be gifted to you by the seller or your family members. These loans have no minimum credit score requirements. As long as your credit history is reasonable and you can show your ability to pay back the loan, you should be able to qualify for an FHA mortgage. The only drawback is that these loans tend to have a higher interest rate than conventional loans.

When looking for a bad credit home loan, don't give up on the first try. While it's not a good idea to apply to every company that's willing to take your loan application, it's also foolish to give up just because one person told you no. Don't walk away with your tail between your legs. This is one of the reasons it's a good idea for people who have credit problems to work with a broker. A broker can help you by trying to fit you with a number of the lenders that they regularly work with.

When filling out an application with a broker, let them know about your credit issues, how much you have for a down payment, and how much you're looking to spend on a home. Being up front with them from the beginning will save you a lot of wasted time. If you'd rather not discuss this information over the phone, online loan applications can make the application process instant and easy. Just make sure you fill out the application completely and with accurate information.

Just remember, no one is perfect and you're not alone. A good majority of the population has less-than-perfect credit, and those who do have perfect credit are in the minority. It's even highly likely that the pompous mortgage lender who told you you'd never qualify for a bad credit home loan has less-than-perfect credit. A lot of lenders understand that unforeseen circumstances can cause set backs for all of us, and everyone deserves a second chance.


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