Getting a Bad Credit Mortgage: How Bad is "Bad"?

By Karen Lawson
Mortgage Credit Problems Columnist

How can you get a new home loan at reasonable rates when you've had bad credit? The truth is that it's best to get your finances in order before you shop for a home loan. If you're buying your first home, it's important to know that there are costs associated with home ownership that you don't have to pay as a renter.

Preparing For a New Home Loan

Mortgage lenders recognize the importance of home ownership regardless of one's credit history. Although they have established certain criteria for approving new home loans, a minor glitch or two on your credit report will probably not keep you from getting a new home loan. Those who have filed bankruptcy or had repossessions may qualify for standard mortgage financing after a couple of years. The following are some steps you can take to get a better deal on your new home loan.

Have Documentation Of Your Income And Expenses For The Most Recent Two Years.

Typically, mortgage lenders will want to review tax returns for the past two years. They may also require current pay stubs or direct deposit receipts from all sources of employment. If you provide the documentation a lender requires as part of standard mortgage underwriting you can save money by avoiding non-standard mortgage loans that cost more in interest rates and other charges.

Getting Your Financial House in Order

Before looking for a new home loan, get your finances in order save money and qualify for better mortgage terms. If you are deep in credit card debt, contact a non-profit credit counseling agency. These agencies can work with your creditors to consolidate and reduce credit card payments. They can also help you establish cash-based budget, and determine how much you can afford for mortgage payments.

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 University of Nevada, Reno.

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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