Bad Credit Mortgage

A bad credit mortgage is also known as a sub prime home loan and are offered by selected lenders who specialize in these kinds of mortgages. These lenders do not always follow the same strict procedures as other traditional banks and credit companies do.

Their procedures accepts credit mishaps that are not considered by traditional home loans lenders. Some of these lenders even actively seek out for people with credit problems.

Bad credit mortgages are normally available for people who have been involved in:

•  bankruptcy

•  foreclosure

•  judgments

•  late payments

If you are considering applying for a bad credit mortgage, first of all, try to avoid needing one or try to fix your credit before you need a mortgage. Get a copy of your credit report and your current FICO score. Check this carefully and if any information is incorrect, get it repaired.

When you have a credit card debt, try working out a consolidation with your credit card company. The same goes with student loans and the like and, when reached a new agreement, make sure to make your payments on time. In time, your credit score will improve and you will save money by getting lower interest rates, this makes your work and effort worthwhile.

The second thing to do is to send a "letter of explanation", in which you explain the reasons why you have a bad credit score, this can be due to unexpected unemployment or medical reasons, which caused some due payments. Keep this letter short, clear and do not hide any information or make it look better. Also consider consolidating your debt.

Four must read bad credit mortgage application tips:

Tip 1: Be careful for prepayment penalties in your mortgage contract. This is to discourage you from refinancing your mortgage in the future. You can find yourself stuck paying a high interest rate after your credit has improved. So ask your mortgage provider about these prepayment penalties.

Tip 2: Reserves. Some lenders ask you for a "reserve", these are liquid assets such as cash on your bank account. It is common that the lenders asks for 3 months reserve on your bank account, so you can be able to pay 3 months of mortgage by using your reserve. Try to negotiate this down.

Tip 3:. Watch out with variable interest rates. Be careful not to add more credit problems by accepting a risky loan which you can not afford.

Tip 4: Be aware of any excessive fees and markups. Compare these different fees at different companies. This can be easily done online or by visiting several banks.