Time was when it was well-nigh impossible for someone with bad credit to get financing for a mortgage or a new car. That's definitely not the case any more, though there are a lot of lenders who make the maintenance of a bad credit loan a hassle and charge the earth for the privilege. Do your due diligence and do not get caught with a loan that you can not handle and which, in the end, will make bad matters worse.
Here are some basic tips to writing a bad credit mortgage and keeping it viable.
First. get a free copy of your credit report from all the major credit bureaus.
Second, check every little detail of the reports. If there mistakes, set about getting them corrected.
Any data regarding a bankruptcy or foreclosure must be shown accurately. In the event of mistakes and often there will be some. Do not kid yourself, insure that the reports are not doubling the trouble by being double counted in collection or charge-off statistics. This is a common practice and is just the result of carelessness on the part of the reporting entity and possibly the reporting agency as well. While you have the right to dispute all errors on your credit report online, do not figure that this will be the end of the matter. In our experience, often the report will be confirmed even when it is in error. Getting persistent errors corrected may take a long time and a lot of wasted energy but it is vital to you to get it done and to hang in there until the facts that you can document are acknowledged.
Third, with a correct credit report at all three major reporting bureaus, make loan applications only with brokers that submit your application to many lenders. Every time your credit report is checked by a lender will mean a reduction in your FICO score. If you apply to a brokerage service that will submit your application to several suitable lenders, only one inquiry will show against your credit report.
Typically, borrowers with credit scores over 600 will be able to avoid large down payments and possibly qualify for 100% financing, even if your bankruptcy or foreclosure is less than two years old. Lower credit scores can sometimes still be processed for 100% financing. As far as the interest rate that you might expect, will depend on the types of institutions that your broker requests to bid. Do not despair of getting a reasonable rate in the 6-8% range since your bad history.
The best broker will only work your application with lenders who make a habit out of lending to those regarding bad credit risks. Figure on answering a number of leading questions about your income level, your length of employment, your job and salary history, etc. These are all normal questions under the circumstances and you should be prepared to answer them fully and without rancor. Remember it's not this lender that you have had a problem with in the past.
Getting a bad credit mortgage is not easy – it takes determination and persistence but, by gosh, it's wee worth it!