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Bad Credit Mortgage Tips on Getting Approved

You may think that it’s impossible to get a mortgage when you’ve struggled with credit problems in the past. However, this is absolutely not true. Many lenders offer special types of mortgages for people with bad credit, and some lenders even specialize solely in lending to borrowers with bad credit. If you’re looking for a bad credit mortgage, then you’ll need to keep some things in mind in order to both improve your chances of getting approved and keep your interest rate down. This article offers tips on getting approved for a bad credit mortgage:

Review Your Credit Report
Before applying for any mortgage, get a copy of your credit report from each major reporting bureau (Experian, TransUnion, and Equifax) and check it for mistakes and errors. Look for things like timely payments that are listed as late, open credit accounts that you did not authorize, closed accounts that are listed as open, duplicate account recordings -- anything that doesn’t match up to your records. The items that appear on your account can be disputed through each agency’s website. Cleaning up errors on your credit report can quickly improve your credit score and, thus, improve your chances of loan approval.

Calculate Your LTV
Your loan-to-value ratio (LTV) is one of the greatest factors that affect your loan approval and interest rate. If you have bad credit and you’re buying a house that requires 100% financing, you’re going to have a much harder time getting approved and getting a decent interest rate than someone who has bad credit and only needs 80% of the value of their home financed. LTV is the amount you’re borrowing divided by the appraised value of your home. Lower LTVs represent less risk to a lender. So, in order to lower your LTV, you’ll need to either make an educated down payment or purchase a home that is worth more than the seller is asking.

Choose Your Lender Wisely
To obtain a bad credit mortgage, you’re going to need to find a lender who does not view you as a significant risk. If you’re dealing with a lender that deals solely with borrowers with bad credit, they’re not going to see you as such a high risk as a lender who deals with borrowers who have generally excellent credit.

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