Some home buyers are able to get a mortgage loan with bad credit; whether or not you can depends on several factors. You will most likely need to prove you have a steady income and compile an unconventional credit report showing perfect payment on several different types of accounts. You may also need a significant down payment as well as a cosigner on your loan.
If your credit score is below what lenders are looking for, you will need to prove you have an extremely steady income. In most cases, you will have to be at your job for at least a year and provide documentation from your boss or company stating there are no plans for terminating your position. Your income will also likely need to be higher than a person with good credit when requesting the same mortgage amount. This helps to reduce some of the risk lenders face when you have a low credit score.
When trying to obtain a mortgage loan with bad credit, it can be helpful to put together proof of good payment history from other sources. If you are currently renting a home, evidence from your landlord that you consistently pay rent on time every month can be useful. You can also request utility payment documentation from the water, gas, electric, cable television, or phone company, as applicable, proving that you keep these accounts current. If you have received a loan from family or friends that you have paid back, you can request they write a letter to your potential lender stating this. Establishing that you are responsible in these areas can help to make up for some issues on your credit report.
Those with exceptional credit may qualify for lower down payments on their home purchase. If you're trying to obtain a mortgage loan with bad credit, you will most likely need anywhere from 25% to 35% down or more, however. As far as most lenders are concerned, the more money you have invested into a home before you begin making payments, the less likely you are to walk out on your responsibility. A sizable down payment will also lower your monthly payments, which can make it easier to get a mortgage loan with bad credit.
If you have a close friend or family member with good income and an excellent credit score, they may be able to help you get a mortgage loan with bad credit. Many lenders will accept cosigners on a loan, which basically means the cosigner is promising that the loan will be paid. This should only be done if you are absolutely sure you are capable of paying your mortgage on time every month; if you are late or default on your mortgage loan, your cosigner will be held accountable for the payments. While getting a mortgage loan with bad credit is not impossible, it can be difficult; if you cannot get one right now, work on building up your credit score and saving money for a large down payment.
