Bad Credit Home Loans – You Can Have Hope

There are definitely lenders out there who will approve bad credit home loans. You may have to do some in depth research to find a good one but once you do you can finally own your own home. The lender you find will mostly be interested in whether you have sufficient income to make ongoing monthly payments without difficulty.

Now we all know that our credit rating and scores are important especially when we want to make big purchases like a house but these days credit is not everything the lender looks at in making their determination about your qualifications. In this recessed economy, most everyone has been affected negatively to some extent.

Bad things happen to good people all the time. Just because you have had a hit or two, or more, on your credit does not mean you are a bad person or even the least bit irresponsible. If you can get the lender to focus on the good things they may come to the conclusion that you are a good candidate and they will work with you.

If the lender decides to work with you and approve you for one of their bad credit home loans be prepared to spend a good part of your day gathering up papers they will need to make a final decision. Tax returns, pay stubs, ID cards or driver’s licenses, social security cards, and anything else they deem important. Your best bet is to start a file, make, and keep copies of everything you are given or submit to the lender.

A good way to help yourself become approved for a home loan when you have bad credit is to come up with or have a down payment. Having a good sized down payment, any where from 5-20%, will go a long way to negating any bad credit rating and showing the lender that you are a good risk for a home loan.

There are other creative accounting ways to get around a bad credit rating and the lender you choose should be able to explain them to you without a problem. For instance we bought our house several years ago and we qualified for 100% financing. How the lender accomplished that is approving us for an 80-20 loan. The first loan is for 80 percent of the purchase price and the second one is for 20 percent which adds up to 100%. The loans cannot be combined because they each have a different interest rate. So keep in mind you will have two loan payments to make each month.

Another way to get around not having a down payment is to agree to pay the PMI, or private mortgage insurance. Private Mortgage Insurance protects the lender in case the borrower should default on the loan and can be used as a bargaining chip when you have bad credit and need good bad credit home loans options. Private Mortgage Insurance can usually be dropped after a few months.