Getting a Bad Credit Mortgage Loan in California

By Karen Lawson
Mortgage Credit Problems Columnist

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If you have bad credit, don't despair. A variety of first time homebuyer programs and loan options can help you buy a home in California. Of course, bad credit (or as mortgage lenders call it, sub-prime credit) can cost more in interest, loan fees, and points.

Know Your Credit History before Shopping for a Home Loan

You're entitled to a free copy of your credit report annually, and you can also obtain your credit score for a small fee. Knowing what's on your credit report in advance can help you negotiate a good deal on a bad credit loan. Mortgage lenders may make loans to borrowers with all kinds of credit situations, but the terms of your bad credit mortgage can vary according to your credit history.

Federal and Local Agencies Offer Bad Credit Mortgage Options

Mortgage loans insured by the Federal Housing Administration (FHA) require lower down payments and offer more lenient credit standards. Other options include state and local housing agencies such as the California Housing Finance Agency (CHFA) that work with lenders to offer programs designed to assist low income and credit challenged borrowers. When shopping for a loan, it's a good idea to ask mortgage lenders if they offer these programs. Sometimes borrowers with bad credit may be asked to explain the circumstances leading to their bad credit. This information is used to assist your lender in approving a bad credit loan. It's a good idea to comparison shop for loan costs, and it is important to understand the terms of any mortgage loan before accepting it. Shopping carefully for a mortgage loan can help you get into the home you want while minimizing problems associated with bad credit.

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