A recent survey of 2,000 found that over two-thirds of people think that access to mortgage credit is a serious national problem. Many also feel that the process of getting a mortgage needs an overhaul:

  1. 23% indicated that applying for a mortgage was difficult because documentation requirements from their lender kept changing
  2. 22% claimed their lender used too much industry jargon
  3. 21% said finding a lender that was easy to work with was challenging
  4. One fifth of respondents said waiting for a mortgage approval (or lack of) was more stressful than waiting to hear if they got a job
  5. Only 7% claimed that they had problems because of their credit rating
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The study shows that the mortgage process is strenuous even for people with good credit

For people with bad credit, then, it is probably worse. What should you do if you have poor credit? Follow this list to make your mortgage process easier.

  1. Dump the shame. The economy has been tough on a lot of people, and you plan to do better in the future, right? Many people end up with a worse loan than they need to because they accept the first mortgage offer that comes along. Their embarrassment about their credit and discomfort with the lending process make them want to conclude it as soon as possible even when it's in their best interest to shop around.
  2. Remember, you are the customer. That means you are entitled to respect as such. Get several quotes from several lenders (easy to do on this site) and don't work with anyone who makes you uncomfortable.
  3. Take action. It's worth a few dollars to get your free credit report and also purchase your credit scores. You CAN handle the truth, and it's best to know up front what you're dealing with. Really. It is.
  4. Start at the top (FHA) and work your way down (Bad credit lenders or hard money). If you have a down payment of at least 10% (and more is better) and a credit score of at least 500, try an FHA lender first. In fact, try several. Ask each lender you get a bad credit mortgage quote from what their overlays are. Overlays are mean requirements that are stricter than FHA's (boooo!). If you have at least 3.5% down (and yes, more is better) and scores of at least 580, you have a shot at an FHA loan. To increase your chances, make all of your payments on time for at least 6 months (and 12 is better).
  5. Make a plan. If you get turned down for bad credit mortgage financing today, get a list from your lender of the factors that caused your denial, and go to work on them. House prices are likely to be low for the next year or so, and you have time to increase your credit score, your down payment, and your savings.
  6. Get a file together. Put in it every pay stub and bank statement you get. Make the paperwork into origami first of it makes you feel better. If you are divorced, get a copy of your divorce decree. Put together an explanation for any past credit problems and keep it in your file. If you get child support, alimony, or other payments, keep copies of the checks and deposit receipts in this file. Make a list of your jobs (company name, address, employment dates, etc.) and home addresses (including landlord information) for the last two years. This will make applying for a loan easy, and if your lender wants extra documentation it's no big deal to come up with.
  7. Learn about the process. If you have any questions, post them here. That's what this column is for.

Mortgage application these days isn't easy even for people with good credit. But just because you have bad credit doesn't mean the process has to be harder for you.