Getting A Mortgage With Bad Credit

Getting a mortgage with bad credit is certainly possible, but is one of those things that you should look into very carefully before you do it,. because if you don’t pursue it carefully and watch out for all the pitfalls you will find that your mortgage is going to cost you a great deal of money at first and in the long run if you choose a mortgage companies offering bad credit loans poorly. Knowing how to get a mortgage with bad credit that won’t cost you tens of thousands of dollars extra is vital when shopping for bad credit mortgages.

To get a mortgage with bad credit, you may as well know that you are going to need some sort of down payment. A few thousand dollars may not cut it either, unless you are buying a very low priced home. You may need as much as fifteen percent down to get a bad credit mortgage. However, this obviously has its benefits as well, as putting fifteen percent down means that you will already have some equity in your home down, and if you can put twenty percent down you will not be required to pay mortgage insurance which can tack an extra hundred or two hundred dollars onto your monthly payment.

Getting approved for a mortgage with bad credit will require that you have a good income, with a low debt to income ratio. Not only will you need to have a good income, but you’ll also need to have some stability on the job. Lenders want to make sure that you are going to be able to continue to make your mortgage payments for a long time and so a year or more on the job, at the same job, is vital to getting a bad credit mortgage. In fact, having five years on the job is recommended in most cases, as it will show the most stability.

Your debt to income ratio, abbreviated DTI by lenders, is how much your monthly debt are compared to how much you make per month before taxes are taken out. Ideally, you’ll want this to be around thirty percent or less. If you have a DTI of fifty percent you are going to find that most lenders are unwilling to work with you, bad credit or not, because they will consider your income already over extended and therefore unable to make the monthly payments on any new kind of financing.  If your DTI is high right now, pay off some debt before you apply for the mortgage.

Getting a mortgage loan for bad credit is available through what are called subprime mortgage lenders. These are lenders that specifically lend to people that have bad credit, at rates that are higher than the prime rates that are offered to those that have good credit – which is where the term subprime comes from. Subprime rates can cost you a lot over time, but they vary from one lender to the next so if you shop around you may be able to find a great deal on a bad credit mortgage. Having a mortgage broker to help you look doesn’t hurt either.