Make Sure You Are Prepared To Take On A Mortgage
If you have bad credit, finding a company that will finance your mortgage loan is almost impossible. Many lenders nowadays are too weary of lending money to people with a credit score under 600. People who apply for a mortgages of all kinds are usually turned down because loan companies fear that they may not be able to pay the loan promptly. However, people with credit score under 600 have it particularly hard. Even so, you should not be saddened with your financial situation because there is still chance that you can get a mortgage to buy your dream home. There are still a few loan companies that are willing to lend financially troubled people with mortgages or loans, because they know not all situations are the same. Be realistic though, and don't rush to a subprime mortgage company that will lend you money while they are betting that you will sink years later. In addition, if you have bad credit, stay away from balloon mortgages, you are only hurting yourself.
Get your records in order. There are a few companies that will lend money to you to buy a home even if you have bad credit, however, you must show that you have the means to pay your mortgage. Buy a file folder and keep all the documents you will need in order to obtain your mortgage. These documents include at least two years of W2's, at least four weeks of check stubs, a list of your financial income and expenses, copies of all three of your credit reports, copies of your recurring monthly bills and proof that you have made arrangements to pay on your outstanding debts.
If you need to, enlist the services of a credit repair company like Lexington Law Firm to help erase erroneous information from your credit report and raise your credit score. Normally, loan specialists would not recommend credit repair companies; however, Lexington Law Firm has a good reputation and a record of proven success. They do charge about $45 monthly for their services, but if it works to improve your credit score, then it is a good investment.
Gather information from companies like NACA and Acorn. These companies have the reputation of helping first time homebuyers get mortgages at very low interest rates. Though they help people who are considered "subprime" borrowers get mortgages, they are not subprime lenders-nor do they deal in the deception that has clouded the subprime lending industry. With these agencies, you are required to take mortgage counseling and you are assigned a counselor who helps you through every step of the process. When you have completed the counseling sessions, and your records are in order, they will help get you approved for a mortgage that you can afford. It is unfortunate that Acorn got such bad press during this last presidential campaign, because they have helped a lot of first time home buyers who would not have qualified for a mortgage otherwise. There are a few other mortgage companies and financial institutions such as Household Finance who will consider financing your mortgage even if you have bad credit or a very low credit score.
Save! Save! Save enough money for the down payment and for at least three to six months of mortgage payments, just in case you lose your primary source of income. Many loan companies also require several fees before they release your mortgage. For loan companies, this simply means that are responsible enough to pay for the fees and the loan itself. It may also help in decreasing the interest rate for your loan. Also, save enough for your taxes, attorney fees, closing costs and house inspection fees. Owning a home is serious business, and part of the reason why many people got into trouble during this last housing meltdown was because they did not have enough money to cover housing expenses (seen and unseen), especially when they lost their jobs. Unfortunately, they did not get proper mortgage counseling before getting wrapped up in mortgages that they just couldn't afford. If you go through companies like NACA or Acorn, they will help you through this process.
When you are ready to apply for a loan, make sure you hire a good attorney to protect your interest. Again, if you use NACA or Acorn, these companies have attorneys on staff that will work in your best interest.