Ask Bill your personal finance question

Bad Credit Mortgage Advice

How, with bad credit, do I work toward securing a mortgage?

How, with bad credit, do I work toward securing a mortgage?

Read full question
Bill's Answer
(5 Votes) | Find Learn Save

  • It is difficult to get a mortgage if you have a low credit score.
  • Work to boost your credit score.

Banks want three things in a perfect borrower:

  1. Stable income
  2. Attractive credit history
  3. Low debt-to-income ratio.

If a potential borrower lacks in any one (or more) of these, the potential borrower will have a difficult time getting a loan.

If your credit score is really as bad as you seem to think, you may have a difficult time finding a lender willing finance your mortgage. While I do not think it is impossible for you to find a loan, I expect that you have a lot of work ahead of you, and you should expect to pay a premium in interest and costs for any loan you are able to obtain. Six months ago, I would have been much more optimistic about your prospects for finding a loan, but the sub-prime mortgage market, which offers loans to individuals with credit problems, has taken a nosedive in recent months, making it much harder for borrowers with less than perfect credit to find a loan.

You can apply with's lender network by clicking on this page: Free Mortgage Quote.

I do not want to sound totally discouraging, though. Your ability to qualify for a mortgage loan will depend on several factors aside from your credit score, including your income, your performance on other secured accounts, and the amount of money you have available for a down payment. If you have a good income and a sizeable down payment, you may be able to find a decent loan despite your credit problems. I encourage you to visit the Home Purchase page for more information about purchase loans and links to find lenders that may be able to help you find a loan.

If you cannot find a loan that suits your needs, you may want to continue working on your credit score. The more you can increase your credit score, the better loan terms you will be able to obtain. A home purchase is a major investment, so do not act too hastily. Take your time to make sure you are in the best financial position possible before buying a home. The Credit Resources page offers a wealth of information about credit scoring and advice on improving your credit rating.

The most important piece of advice I can offer is to make sure you do not borrow more than you can realistically afford to repay. The number of repossessions has skyrocketed in recent months due to consumers' inability to keep up with their adjustable interest rates, so make sure that you do not fall into that trap. The risk of running into this problem has decreased significantly in the past few months due to the crisis in the sub-prime mortgage market, but you should still be careful in examining all of the terms of a loan before you agree to it. Spend a few minutes to learn if a no-cost mortgage is right for your situation.

Good luck. I hope this advice helps you Find. Learn. Save.


Get Mortgage Rates!
(5 Votes)

People also like to Read

Daniel Cohen

FHA Loans | FHA Loans have huge benefits, including VERY low down payments and low credit limits. Get FREE info on FHA loans... Read more >>

Betsalel Cohen

Mortgage Basics - Down-payment, Equity, and LTV | Learn about mortgage terms relating to your property's value and how it aff... Read more >>

Betsalel Cohen

Whether you are refinancing or buying a home you will ask yourself if you can afford the mortgage. Learn to prepare and evalu... Read more >>

Betsalel Cohen

Qualify for a Mortgage | You can get qualified for a mortgage and the best rates by preparing yourself. Make sure that your c... Read more >>

Betsalel Cohen

Obama Passes HARP, but borrowers are looking for HARP 3.0 Mortgage Refinance programs. When a HARP 3 update is announced, you... Read more >>

Mark Cappel

Applying for a mortgage with bad credit and a spouse isn't as difficult as you may think. Learn the what lenders look for whe... Read more >>

Betsalel Cohen

PMI | If you are looking to buy a house and take a mortgage loan with a low down payment then PMI can...... Read more >>

Brad Stroh

Refinance My Home? If you are asking 'Should I refinance my mortgage?' or 'Is refinancing my home a good?', then check out ... Read more >>


1500 characters remaining