Mortgage Loans with Bad Credit: They Are Possible

People with bad credit have the same hopes and dreams as everyone else, including home ownership. Many times, bad credit situations are a result of poor decisions when we are young or circumstances such as layoffs that are out of our control. If you are one of those people with bad credit who has changed your ways and are now looking to get a mortgage loan you may be concerned whether or not this is even possible.In fact, getting a home mortgage loan with bad credit is achievable if you know what you need, what to look for and where to look. So-called subprime mortgages offer homebuyers with bad credit the option to finance their home purchase despite poor credit histories. However, there are specific qualifications you need to meet.Current, Reliable EmploymentBasically, your poor credit history presents you as a risk to lenders. They need some guarantee that even if you have not met all your financial obligations in the past you will be at least able to meet them in the future. Therefore, you need to prove that you can pay each month through steady, reliable and sufficient employment.Those who are unemployed or do not make enough money each month to cover the mortgage costs along with other expenses will not be considered. Also, if you have recently gotten a new job, it is important that you wait until after the probationary period to apply for a home loan as it will make your application stronger.A Large Down PaymentAnother way to instill confidence in lenders is through providing a large down payment on the home you wish to purchase. This does two things. First, it reduces the amount of money you need to borrow for the loan. Second, it shows lenders financial responsibility since you were able to save a big chunk of money to put down on your home. This is the kinds of habits that will make them more likely to believe you are able to repay your loan despite your bad credit history.Know Your CreditIf you have been denied loans in the past and given bad credit as a reason without details now is the time for you to look into the situation yourself. You need to understand where FICO scores come from and how yours got to its current level. This way when you meet with lenders you will be prepared and be able to explain the black marks on your credit history.Furthermore, through researching your own credit score you may find fraudulent charges or accounts that are downgrading your standing. You will then be able to take steps to rectify these errors.Know Your DebtThe debt-to-income ratio that you currently hold is one of the final keys to unlocking your mortgage potential. Even people with good credit who have too much debt can be denied home mortgages. The debt this includes is credit cards, school loans, car loans, and other liens that you need to pay every month such as alimony and child support. The rule of thumb practiced by most lenders is a 40:60 ratio.Getting a MortgageObviously, choosing to buy a home is one of the most important things you will ever do. If you have bad credit, getting a mortgage loan is still possible as long as you meet the other qualifications I discussed here.