With credit cards, student loans and medical bills plaguing many American consumers today, a huge number of people have bad credit. Even the ones who are trying their best to pay off their debts have some work to do before improving their credit score. As such, it's difficult for many of them to get a mortgage because of their bad credit. It is more difficult to get a mortgage if your credit is bad, but it's not impossible. Following are some things you can do to still get a mortgage regardless of your credit score.
Gather your available cash. The best thing you can do when trying to get approved for a mortgage when you have bad credit is to gather a larger down payment. You may need to clean out some of your bank accounts in order to come up with a sizable cash payment, but it will likely be necessary if you have bad credit. Banks and lenders are much more likely to loan you money on a mortgage if you can put 20 or 25 percent down on the home because you become less of a risk when you do that.
Make your payments on time. A good portion of your credit history is based on how timely you make your payments. You can start improving your bad credit by making on-time payments for six months to a year. Once you do this, you can go back to the mortgage lender and see about getting a loan. Your credit score will have jumped by that time and you may even get better mortgage rates as a result.
Consider subprime lenders. Subprime lenders are more likely than traditional mortgage companies to loan money to borrowers with bad credit. However, some subprime lenders have a reputation for taking advantage of people by charging extra high interest rates. Most of the subprime lenders are out of business due to the tough financial times, but you still may be able to find a few still in business.
It is not impossible to get a mortgage when you have bad credit. Lenders do, however, consider you to be more of a risk when you have a history of late payments, defaulted loans or too much debt. By fixing these problems and making some changes in your spending habits, you can become a more attractive credit risk and realize your dream of buying your first home!