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Bad Credit Mortgage Loans: Are You Really Ready?
By Karen LawsonMortgage Credit Problems Columnist
You've got bad credit.
Should you buy a home now because prices are falling, or work on improving your
credit before shopping for a home? It depends on a couple of things.
Can You Get Approved
for a Bad Credit Mortgage?
Buying a home with bad credit is still possible, although
underwriters will want to be very sure that you can manage your payments before
approving your application. A healthy income and some money in the bank will go
a long way toward convincing a mortgage lender that you are a good risk.
Can You Afford the
House?
Getting approved for the purchase is one thing, comfortably
affording it is another. Consider your current housing expense. Look also at
how much money you have been able to save while paying that amount. Then look
at the payment of the house you want to buy, and also remember that you will be
paying for taxes, insurance, and repairs. If it is much more than your current
housing expense, think long and hard before jumping in. And if you couldn't
save money while making a lower payment, where is the money going to come from
to make a higher payment?
Is the House a Good
Investment?
Current real estate prices may offer you the chance to make
a very good investment, especially if you plan to keep the home for a few
years. Interest rates are near historic lows and sellers may be motivated to
help you with your closing costs or pay for you to get a lower interest rate.
And a bad credit mortgage loan can help you build some good credit history and
improve your finances down the road.
Will You Turn Your Credit
Around?
Bad credit mortgages are called "band-aid" mortgages
for a reason. You are only supposed to have them for a short time, then you
build some good credit and refinance to a better loan. Once you qualify for a
lower payment you can then use the savings to pay off other bills, invest for
retirement, or pay your mortgage off early. Your bad credit mortgage can be the
start of a lifetime of good credit and smart financial decisions -- if you're
prepared to make some sacrifices now.
It comes down to affordability and responsibility. If you
feel that your income is stable and sufficient to afford a mortgage, and that
you will be disciplined enough to pay your mortgage and other bills on time, a bad
credit mortgage and a new home investment might be the best move you can make.
About the Author
Karen Lawson is a
freelance writer with more than 15 years of experience in mortgage banking. She
holds BA and MA degrees in English from the
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
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