Mortgages With Bad Credit

It is possible for a person with bad credit, even very bad credit; to get a mortgage if they meet certain qualifications.

Most mortgage lenders and property owners will be willing to work with a person who has bad credit but can demonstrate that they have a steady source of income. This means that a person with a good job or a pension might qualify for a mortgage with bad credit. Such an individual may have to pay higher interest or come up with a bigger down payment up front.

It´s possible to get a mortgage with bad credit because a mortgage is a secured loan. In a mortgage the lender uses the property purchased as collateral. That means they can foreclose on the property if the borrower defaults on the mortgage.

Some Strategies for Getting a Mortgage With Bad Credit

The best strategy to use when getting a mortgage with bad credit is to have a large down payment available. If you can pay several thousand dollars or more in cash you should have no problem getting a mortgage. Especially on a property that is selling at a lower price.

Another strategy is to look for property that isn’t selling or has been sitting empty for a long period of time. The owners of such property maybe motivated to get rid of it so they might drop the price or carry a mortgage. Carrying a mortgage means that the seller assumes the risks if the buyer defaults.

A buyer can also get a cosigner, a co signer is a person, usually a family member; with good credit who agrees to cover the mortgage if the buyer defaults. Historically many young people got their parents to cosign mortgages for them. 

When To Get A Mortgage

Only get a mortgage when you are sure that you can pay several months of mortgage payments. Never get a mortgage if your source of income is uncertain, for example if you think you will lose your job or your business will lose money. Only get a mortgage when you know that you can pay it off. 

Make Sure the Mortgage Doesn’t Cost More Than the Home

Check property values carefully when buying a home because its possible that the mortgage may cost more than the home itself. Property values can drop quickly and suddenly. In some situations home prices have fallen by half.

This means that a home with a $200,000 mortgage on it could only be worth $100,000. In such a situation the homeowner would still owe the mortgage company $200,000 even though they could only sell the home for $100,000.

Try to avoid buying a home when property values are falling steeply because it could lead to this situation.