First Time Home Buyers: Getting Approved for a Bad Credit Mortgage

Because of a wide variety of mortgage lenders specializing in different home loans, many first time home buyers are able to realize their dream of homeownership, without completely wiping out their bank accounts.

Although mortgage experts recommend home buyers saving money for down payment and closing, this is no longer a requirement. In fact, having good or acceptable credit is no longer a requirement for obtaining a mortgage loan.

True, a good credit rating will have positive effects. For example, good credit may help buyers qualify for a lower rate. This could amount to buying a more expensive home. Nonetheless, mortgage lenders are realistic, and they realize that a large percentage of buyers entering the housing market have fair to bad credit ratings. Thus, they have created home loans that target these individuals.

Types of Bad Credit First Time Home Buyer Loans

Buyers have varying circumstances. Hence, there are loans geared to meet specific needs. If bad credit is an issue, working with a mortgage broker may produce good result. Why? For starters, mortgage brokers are familiar with many loan programs and have connections with numerous lenders. For this matter, a broker is more apt to offer sound advice on the most suitable loan programs. Typical bad credit mortgages include:

1. No Money Down Home Loans. Even with bad credit, mortgage lenders and companies are prepared to offer no money down or 100 percent financing loans to first time home buyers. In some instances, a buyer may qualify for 103 percent financing. The additional monies are ideal for paying closing costs and other related fees. To qualify for either loan program, a borrower’s credit score cannot drop below 580 – 600.

2. No Credit Score Loan. If you have money for a down payment and closing, consider applying for a no FICO score home loan. These loans are perfect for self-employed and commission-based employers. The only downside to this option is that lenders will only finance 80 percent of the home price. Thus, buyers must be ready to pay the additional 20 percent out-of-pocket. Furthermore, the interest rate on no FICO score home loans is slightly higher.

Reasons to Get a Bad Credit Mortgage

� High Debt to Income Ratio
� Low Credit Score
� Unverifiable Income
� No Credit History
� Previous Bankruptcy, Foreclosure, or Repossession
� Collection Accounts, Past Due Accounts, and Judgments

Tips on Applying for Bad Credit Mortgage

� Attempt to Improve Credit History
� Reduce Debts
� Save Money for a Down Payment
� Avoid Opening New Lines of Credit
� Request Multiple Mortgage Quotes