We’ll talk about how to get a mortgage with bad credit first and then some special loan programs for bad credit borrowers as well as some risks.
Getting a home loan on bad credit will be more difficult than if your credit score is in the 800s but it can still be done. Banks are in the business of lending and they want to make loans, you just have to do a few things to convince them.
1. Start saving for your down payment of at least 20% of the home price. You can get loans with as little as 3% down but the bank will want to make sure you have lots of equity if you are a bad credit borrower.
2. Check your credit report and start improving your credit score. It’s going to take a while to save up the 20% down-payment so you’ll have time to build your credit score as well.
3. Put all your home loan documents together. When you apply for a home loan, whether on bad credit or otherwise, you’ll need several financial documents.
4. Understand how much home loan you can afford. Do you really need that mega-mansion? Do you really need that extra room for a dining table if you always eat in the kitchen or living-room?
5. Get pre-qualified for a home loan. Not only will getting pre-qualified for a loan help to see how much home you can afford but it will help you in the home buying process as well.