Do you have bad credit? You may still get a mortgage loan and make a smart real estate investment

By Gina Pogol
Mortgage Credit Problems Columnist

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If your credit isn't as good as you'd like, last year's housing boom may have passed you by. Sellers got high prices without lifting a finger, lenders had all the business they could handle, and buyers with bad credit were left out in the cold. Today, however, even buyers with a poor credit history can get in the driver's seat.

Builders Willing to Help

New home builders have a problem because they have houses they need to sell in a declining market. According to Money Magazine, developers don't want to cut the price on a finished, unsold home, because it reduces the value of the entire neighborhood. They are much more willing to offer you a healthy incentive to buy that house. If you have bad credit, this could be just what you need to become a new homeowner.

Lower Your Interest Rate and Payment

Bad credit mortgages carry higher rates than conventional loans for a reason--borrowers with bad credit present a higher risk to the lender. If you have a poor credit history, the higher payment makes it harder to afford the home you want. To sell this home, the builder may be willing to pay your closing costs, as well as points to the lender for lowering your interest rate. A 5 point incentive (5 percent of the purchase price) goes a long way toward buying down your interest rate and getting you a manageable payment. The National Association of Home Builders reports that 42% of new home sellers are paying closing costs, and 26% are paying buyer's points on mortgages.

Bad Credit, Good Investment

Buying when the housing market is down makes sense. A bad credit mortgage can get you into a home while prices are good. Make your payments on time, and your mortgage can help you re-establish good credit. You could very well end up with a smart investment now and a better financial future.

CNNMoney.com: Builders to buyers: Take this house, please!
National Association of Home Builders

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