Having bad credit isn’t exactly a good sign for a lender. However, regardless of what anyone says, it is possible for any borrower to get a mortgage loan with bad credit. In every lending decision bad credit is just one piece of the decision-making process, and bad credit mortgage companies exist to provide loans solely to people who still need to flesh out past personal finance decisions.
Bad Credit Companies
Every bank or lender in existence today is a bad credit mortgage company. Banks would prefer to make loans to people with perfect credit, but the reality is that not everyone has perfect credit. Making money as a banker requires making loans, and every bank is willing to make a loan to people who have less than stellar credit history.
Before you even think about going to buy a home, or even consider visiting a single open house, go to a lender to see what they can do for you. Known as a pre-approval, a lender can run reports that will tell you how much you can borrow and at what interest rate the money is available. This pre-approval process is a critical step, since it will tell you which way to go next. If you’re approved and satisfied with the terms laid out, then proceed to shop for a home. If you find that your bad credit affects your loan more than you had thought possible, talk to the agent about ways to improve your chance of getting a loan.
Here are some tips to ensure that bad credit does not affect your decision to purchase a home:
1. Clean up – Your credit score is always changing from one month to the next. Bad credit is not something that stays constant, and it can always be improved. For most people, bad credit is negative for getting a mortgage because their bad credit is due to high debt balances. If you’re unhappy with your current mortgage opportunities, take a few months off the real estate market to really dig deep to pay down debts. Start first with the smallest debts, and try to keep each debt below 30% of the available credit line.
2. Boost Cash – The cure for bad credit is to remind the bank that you’re a good risk for them to take. Boosting cash reserves and offering to put up a bigger down payment speaks directly to the bank in a language they can understand. Banks want to see a vested interest from the homeowner in maintaining their property, so a down payment is a great way to put some “skin in the game” from the lender’s perspective.
3. Stay put – Banks want to see that you are responsible and presumably easy to work with. Bad credit borrowers already have enough concerns from your credit history, so try to keep the rest of your life consistent. Typically, bad credit mortgage companies want to see that you have worked at the same employer for at least two years. The longer the better, so don’t run off to change jobs before you sign on the dotted line.
Bad Credit Mortgage Companies
The business of finance and banking is all about trust and relationships. Lenders have to feel confident giving someone hundreds of thousands of dollars now for a later repayment. They also have to feel confident that you are someone who can change from your bad credit history and make your mortgage payment on time.
When looking for bad credit mortgage companies, turn first to financial organizations with whom you have the best relationships. If you already have a checking or savings account at a particular bank, and feel as though your history there is beneficial to your story, then go to this bank first. You’re much better at arguing your case for a loan, or for better terms on a loan, if you have a history of working with the person with whom you’re negotiating.
The bank knows that if they lose you on a mortgage, then you’re likely to also take all your other banking services to another company. Even with bad credit, mortgage companies and banks value every customer, as they are what makes the bank profitable. Use your history with the company to state your case firmly, and at every crossroads remember that you can, at any time, take your business elsewhere. Bad credit doesn’t mean you should give up the upper hand in negotiations.