Finding a Bad Credit Mortgage

:: Bad Credit Lender columnist : Leslie Collins - 5/2008

If your credit report indicates less than perfect credit history you may have asked your self, "how do I find a mortgage with bad credit", or "My FICO credit score is less than 680, what lender will qualify me?"

You'ld be surprised at the availability of programs emerging that service bad credit candidates, you simply must shop mortgage loans. If you're a subprime - bad credit candidate you may have been led to believe you can't get a decent interest interest rate but this is a myth.

"...If your credit score is below 680, you should STILL be inquiring with no less than 3 mortgage lenders. It's possible to decrease your interest rate by as much as 4.25% just by comparing quotes."

Your mortgage goal? Qualifying for the lowest mortgage interest rate and avoiding any junk fees typical of predatory lenders.

How Do You Find a Good Mortgage Broker?

The best way is to pick up the phone and start inquiring. It sounds simple but you need to get used to speaking with mortgage lenders and becoming comfortable with the rapport - remember their agenda is to qualify you for a loan and make a sale - your agenda at this point is to gather information. So be patient! Arming yourself with some industry knowledge is critical! More on that later.

Here's the process

You can start by visiting multiple lender websites - 3 is good - go the contact pages, simply find their 800 numbers and write them down. Don't get too concerned at this point with specific lenders; you want to narrow down your search to the find the lowest interest rate and avoid paying hidden fees . Next step is to prepare some basic information - lenders will definitely ask you about your financial situation.

But what information will I need ?

Know your credit score - you can get a free report here : free credit score report.
Your Monthly Gross income - all sources, child support, interest income etc...(be as realistic as possible, overstating won't help you) - add it up for the month.
Your Monthly Expenses: auto payments, student loans, monthly credit card payments - any revolving credit that will continue past 10 months - add it up for the month.
Don't include expenses like gas and groceries and entertainment.

Next familiarize yourself with these 4 concepts

Read - Negotiate a Bad Credit Mortgage - 4 Tips. These will surely increase your credibility as a knowledgeable borrower and make it much less likely you'll be a victim of predatory lending.

Will Running Multiple Credit Inquires Hurt My Credit Score?

No. If they are all run within 45 days they are treaded as one "inquiry", at most your score wil drop less than 5 points.

If the lender wants to run an official "Mortgage Application" ( which pulls your credit scores from all 3 major credit bureaus, equifax, experian and Trans-union), tell them you'll agree only if they waive the application fee up front.

If you end up locking a rate with THAT broker, the fee should appear on the GFE ( Good Faith Estimate, which should be mailed to you after 3 days of the application).
More on how inquiries affect your credit score: credit inquiry

Get Started

Bad credit borrowers tend to shop less for home loans and therefore are likely to settle for higher interest and excess fees when seeking a mortgage. Competition between brokers is what gives you the best deal.