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Saturday, October 19, 2013

Bad Credit Mortgage Approval Tips

Whether you are looking to purchase your first home, or are interested in refinancing your existing home loan, bad credit can potentially throw up some road blocks during the lending process. However, their are lenders now that specialize in bad credit mortgages, assisting people who suffer from a less than stellar credit report, foreclosure, auto repossession, or even a bankruptcy. These issues could easily hinder a conventional loan from a traditional lender, however a good mortgage broker will have several contacts available with companies that will provide a mortgage for bad credit and other unusual situations.

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Acquiring a bad credit mortgage, may be the first step to rebuilding your credit. Many people with credit problems find that a bad credit home equity loan can help them get back on their feet and find the way to personal financial freedom once again. A bad credit loan can be used to help get your life back on track, avoid a potential bankruptcy, and eliminate calls from creditors .

FICO - Fair ISAAC & Company - is the leading credit reporting agency that lenders turn to when it comes time to credit scoring your mortgage application. If you do have bad credit history, it will all be documented in a credit report and FICO score. The exact formula used by FICO cannot be publicly disclosed because of a decision made by U.S. Congress. However there are some things generally known about the FICO scoring system which could help you understand how you stand a better chance to get approved. Payment history (no late payments), amount owed on credit cards and other loans outstanding, even recent history of opening or closing credit accounts can affect your score.

Your FICO score is derived from each credit report, so before you apply for a home mortgage loan, get a copy of your credit report and make sure there is nothing on there that shouldn't be there. Another article I wrote describes how to get your free credit report from each of the 3 reporting agencies. Your mortgage broker can also help you review the report and guide you on what to do if you spot errors. If there is incorrect data, get it changed before applying for your mortgage loan.

Overall the higher your FICO score, the better chance you have of getting a mortgage approved. Also, the higher your score, the more room you have to negotiate a lower interest rate and also a higher score can counter balance other factors such as short employment history, non-documented income, and other issues that make getting a mortgage more difficult.

While no one can actually make the process of getting a mortgage or financing simple, mortgage brokers that handle a high number of bad credit customers can make getting a mortgage easier for poor credit, no credit, no cash down, or various job/income situations. Each lender uses a different set factors and weights for the job that you may or may not have, your credit score, length of employment, other assets available, etc. so your broker can work with multiple sources to get you the best deal.

Many people who have bad credit may feel that a home loan is out of reach for them. Whether you need to purchase a home for the first time, relocate to a new home, or would like to refinance your current home, rest assured that there is a loan program available for you. Even if you have bad credit, you may be able to find a home equity loan, a home purchase loan, or even a loan to refinance your current mortgage at a lower rate and save you hundreds of dollars a month in interest payments on your credit cards.

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