Bad Credit Mortgage - Best strategies

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Bad Credit Mortgage - Best strategies
Getting a mortgage, even with bad credit, is far easier these days than it ever has been before. A bad credit mortgage loan isn't as difficult to find as you might think. There are many companies that have built their business on making bad credit mortgage loans to people who can't qualify for conventional mortgages. Because conventional mortgage lenders make their decisions on loan qualifications based on a credit score algorithm, "bad credit" often means no more than "you don't fit the profile of our ideal bill payer". A company that offers bad credit mortgage loans has far more relaxed standards for qualification.

What is a bad credit mortgage?

A bad credit mortgage is often referred to as a sub prime mortgage - one that carries a higher interest rate than conventional lenders will offer. Often, you can find a bad credit mortgage that offers a high introductory rate that will be adjusted after two to three years of on time payments. This kind of loan is known as an 'adjustable rate mortgage', or ARM. While the rates are generally adjusted to suit changing prevailing interest rates, adjustment times are a good time to refinance the entire mortgage. This is one of the best bad credit mortgage strategies. Taking a high interest sub prime mortgage with the intent of refinancing in a few years when you've had a chance to improve your credit score with on time payments and other loans is a strategy that is used often - because it works well.

What's a good strategy to get a better interest rate on a bad credit mortgage?

Lenders base their decision to extend credit on your 'credit score' - a number that's calculated on a list of factors that make up the 'ideal credit applicant'. In general, the ideal credit applicant makes within a certain salary range, fits a particular social profile, pays bills according to a 'normal' pattern, and has held a job and lived in one place for over 2-5 years. For each point that you vary from the 'ideal', there are points knocked off your credit score.

In order to qualify for a lower interest rate on your mortgage, you need to take steps to look more like the 'ideal'. Your best strategy is to eliminate as much outstanding debt as you can, and be prepared to explain circumstances that make you look less than ideal. If you've just changed jobs after ten years with your old company to take a higher paying job with better opportunities, make sure to note both your stability in your old job, and the increased opportunities in your new one.

By the same token, your best strategy to qualify for the lowest rates available on a bad credit mortgage is to correct and amend your credit report as much as possible. If a series of missed or late payments was due to an unusual circumstance that has since been resolved noting the circumstance AND its resolution will go a long way toward making you look like a good candidate for a bad credit mortgage.

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Bad Credit Mortgage - Best strategies
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