Need a Mortgage but have Bad Credit?

You can still buy a home if your credit is bad. There are ways to accomplish it, and many lenders are available to help you. Of course, it's more difficult and you will certainly pay more money. But it can be done. Listed here are some tips to keep in mind as you shop for your home mortgage; take heed, they could save you a bundle.

• First, keep in mind that you do have options. Most lenders today offer bad-credit mortgage programs, and they compete quite aggressively with one another. But if you don't know that, you'll take the first offer that you get. And that's exactly what they want you to do. Lenders count on your lack of knowledge of your own options, as well as your desperation for financing because of your credit.
• Get serious about developing -- and sticking with -- a budget. You have to get and maintain control of your finances. A budget will show you where your money is going, and help you to allocate it more wisely.
• Check your credit. Give yourself time to do this before you apply for a home loan. You might not be able to clean up every derogatory mark, but you may be able to correct some errors, and that too could be enough to help your score.
• Pay your bills on time. Enough said; there's no better way to boost your score.
• Repay your loans in installment payments. This helps to establish a positive history and is much more valuable to your credit than paying off a loan with just a few big payments or one lump sum.
• Bring any late or missed payments up to date as quickly as possible. Your credit file takes into account not only your late payments, but just how late they are; for instance, whether they're 30, 60, or 90 days past due.
• If you plan to apply for a mortgage (or financing for any large purchase), don't open any new accounts for three- to six months before that time. Opening or even trying to open new credit accounts (it shows by the inquiries that are left on your file) gives lenders the impression that you may be attempting to run up as much credit as you can, and that always makes them nervous.
• Try to have three to five active trade lines in your credit file. This is the average number that most people with good credit have. In addition, with revolving credit accounts, be sure to keep your balances below 30% of their limits.
• Don't close any old accounts that are still being reporting in your credit file, even if they're bad. This can actually only hurt your score, because when you close those older accounts your credit history will suddenly look a lot younger than it actually is.
• Assess your potential lender's character. The lender is assessing you. You'll want to ensure that your lender is fair and honest, as well. Be wary of spoken promises that he or she hesitates to put into writing.
• Explain to the lender, in writing, about past credit problems or other potential trouble areas of your application. If you have a good reason for your credit difficulties, let your lender know. Even with computerized underwriting, a human being is going to examine your file; your explanation may make the difference between denial and approval.