How To Ensure Bad Credit Mortgage Approval

If you are looking for bad credit mortgage approval then you should understand how the mortgage approval process works and whether mortgage approval bad credit notwithstanding is even possible. First of all, there are lenders in today’s market that specialize in lending to people that have had past credit problems because there are many people that have suffered a job loss or other type of financial problem that has put their credit in peril. These lenders are called subprime mortgage lenders and you can get approved quite easily for a loan through them.

So why does a subprime lender do mortgage approval for bad credit, when it is such a risk. Simply because they make a lot of money from a bad credit mortgage that does pay their mortgage payment and goes to full term, for instance thirty years. The thing that you have to remember is that these subprime lenders will charge a higher interest rate than conventional mortgage lenders, thus the name subprime, or less than prime. Even a one percent increase in the prime rate can add up to a whole lot of money over a thirty year loan term.

To get this mortgage approval with bad credit you do need to have some sort of down payment. While there are first time home buyer programs and no down payment programs you usually need good credit to qualify for them. However, there are also government programs for no down payments and reduced payment on mortgages that you may be able to qualify for and get mortgage pre approval bad credit and all. You should check with your local housing office or with the lender that is offering these mortgage loans for people with bad credit to see if you can qualify for them.

There are a few other things that might affect whether or not you get approved for a bad credit mortgage loan as well. One of those we have already discussed – having a large down payment can make a big difference as to whether or not you get approved for a mortgage. However, your income can also be a factor. If you have a great income, or if you and your spouse combined make over $50,000 a year then you will be more likely to get approved than someone making $20,000 a year. Also, stability is important because they want you to continue to be able to pay the loan to term so having a few years on the job can help as well.

Also, you might find that reducing your debt will help. For instance, if you are paying on a car and you only have a few payments left or if that credit card bill is nearly paid off, pay a couple of things off and reduce your debt to income ratio. Your debt to income ratio is the amount of payments that you make per month to your debt as opposed to how much your monthly gross income is. If your DTI is above thirty five percent than making a few adjustments and paying some things off might just put you over the top when it comes to getting approved for a bad credit mortgage loan.