Loan Articles


Getting a mortgage with bad credit is not as easy in comparison to having a good credit. Although looking for a lender who is willing to offer you mortgage is a tough experience, it is not impossible. The first thing one needs to have is capacity to pay off the mortgage on time. If payments are remitted on time, it may even raise one’s credit score.

Applying for a Mortgage Loan

A mortgage loan application with bad credit follows the same process as that of a regular mortgage loan or another type of loan. The credit history and records of the borrower will be examined first. This process will determine if the borrower is capable of paying off the loan before it is granted. The lender will also look into the amount of debt the borrower has, checking if he or she has enough cash or sources of income that will ensure that the lender is paid back.

Making a Huge Mortgage Loan Down Payment

Lenders will usually grant a mortgage when the borrower is willing to pay off at least 20 percent of the loan or more as a down payment. This will show that the borrower is willing to put down a substantial amount of money for the loan. A big down payment will also serve as a proof that the mortgage is at a lower risk level. Homes that are subject to a mortgage loan agreement become less vulnerable to foreclosure proceedings when the borrower offers a higher down payment than the usual 5-10 percent.

Improving the Loan Payment History

Before applying for a mortgage or a second mortgage, the borrower must first provide a proof of good faith. The payment history of the borrower affects the outcome of his or her loan application. Therefore, even if the borrower has a bad credit standing, he may have the chance of obtaining a mortgage loan as long as he shows a proof of paying his debts on time. Regular payments on a well established loan without any signs of non-payment will definitely increase the borrower’s chances of obtaining a mortgage.

Reduce the Existing Debt

Paying one’s outstanding obligations to reduce the accumulated debt is a good sign for the lender. This will make the borrower a good contender for a mortgage application. The payment of existing debts is one of the good signs, showing the willingness of the borrower to set aside cash to pay for debts on a monthly basis. Lenders are actually looking for people who use their money toward debt repayment. If a borrower has a bad credit history as well as a bad debt payment history, his application will most likely be turned down.

Go to Subprime Lenders

If banks and other mortgage companies fail to offer a mortgage loan, there are people who can sponsor it. Subprime lenders specialize in offering mortgage loans to borrowers with bad credit. However, be careful when dealing with them, because some may be taking advantage of your situation. Make sure you deal with people who have a credible background.