Five Tips for Getting a Bad Credit Mortgage

By Gabriel Traverso
Mortgage Credit Problems Columnist

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Applying for a mortgage with bad credit in today's market means you shouldn't take the first loan offer you're given. To get the best possible deal on your home loan try following these five tips.
  1. Shop around: Many mortgage lenders are tightening their standards and offering fewer options for consumers with bad credit, and rates and terms can vary dramatically in the subprime market. To improve your chances of getting the best possible deal you need to shop around. Try using online forms to save time.
  2. Compare rates: If you have bad credit you're likely to pay a higher interest rate than someone with good credit. If you are applying for an adjustable rate mortgage ask how your rate and loan payment will change over the life of the loan--and whether your mortgage payment will be lowered if rates go down.
  3. Points and fees: Ask your lender to provide you with disclosures (called Good Faith Estimates and Truth-in-Lending forms) showing the fees and costs associated with your home loan. See if any of those costs are negotiable.
  4. Down payment: Find out what each lender requires for a down payment and how you need to verify that the funds are available. Ask if there are any special programs you can take advantage of.
  5. Negotiate: Just because you have bad credit doesn't mean you can't haggle a little. The mortgage business is incredibly competitive and some lenders might be willing to work with you here and there. If you don't ask you'll never know.  
When shopping around for a home loan, especially if you have bad credit, the more prepared you are the better off you'll be. Write your questions down and gather all the facts before you make a decision.

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