Your credit is shot. Does this mean you can forget about owning your own home? Not at all! Just because you’re not a shoo-in for an “A” loan doesn’t mean you don’t have options. For one, you can take out a bad credit mortgage.
Online lenders can offer you tons of bad credit mortgage programs, so you can compare as many programs as you want until you find one with the best terms for you.
Applying for Bad Credit Mortgage
Applying for mortgage if you have bad credit can require a tad more paperwork, but go ahead and do it anyway. It’s a great way to rebuild credit quickly. Here are some of the things you will need to do.
1. Make Sure Your Credit Score and Credit Report Are Accurate. If something in your credit report is incorrect or even the least bit off, fix it. Improving your score – no matter how slightly – is always worth the extra effort, trust me.
2. Prepare Paperwork That Proves Steady Income. Such paperwork include deposit slips, pay stubs, and the like. Keep in mind that you have bad credit. The mortgage rate you get will depend heavily on how well you can prove you have a steady source of income.
3. Set Strict Repayment Guidelines for Yourself. Most importantly, be sure you can follow it. Always pay in full and on time. If you get in over your head and default payments, you will only make your credit situation worse.
Getting the Best Deal
The best way to get the best deal is to shop around. This can’t be emphasized enough – take the time to shop, shop, shop.
1. Ask for Explanations From Every Broker You Talk To! Ask about the mortgage rate, fees, and everything else that anyone in your position will need to know.
2. Shop Online! There are many benefits to using the services of online brokers. First, they have lower overhead so you won’t find yourself saddled with burdensome but unnecessary charges. Second – and the most important – they have more programs for borrowers like you.
3. Do Your Own Research! Don’t believe everything you’re told. Ask friends who have taken out bad credit mortgage themselves. Look up the terms you were initially quoted.
The more you shop around for options, the higher your chances of ending up with the best loan around.
Three Things to Watch For
Now, you already know what a bad credit mortgage is but do you know what to watch for, when considering your options? Here are three things to keep an eye out for.
1. Prepayment. Some companies will stick you with prepayment penalties so you will stay with their programs. Watch for this clause – it can mean a huge loss!
2. Penalties and Fees. Avoid subprime loans. They’re costlier to process and they come with higher payment penalties and fees.
3. Rewards. Are you benefiting from the rewards your lender is giving out? Certain companies give out rewards for better money management. For instance, if certain payments are made on time, you may be rewarded with a lower interest rate!
Bad credit mortgage may leave a bad taste in your mouth, but don’t let that keep you from improving your credit standing. Used wisely, it’s a great tool for credit repair!