Home Loan With Bad Credit

You can get a residential home loan with bad credit.  What is a home loan with bad credit?  What is bad credit?  How bad can your credit be and still get a home loan with bad credit?  What if I have always had bad credit and currently have bad credit now?

When you see mortgage lenders advertise that they can help folks get a home loan with bad credit, there is a catch.  Home buyers who have had prior bad credit due to an extenuating circumstance or circumstances are the only ones that are eligible for a home loan with bad credit.  Mortgage lenders want to see a mortgage loan applicant’s overall credit history and see that for the most part, the mortgage applicant has been paying their bills on time but see that there was a period where the mortgage loan applicant went through a period of bad credit.  By bad credit, it means late payments, open collections, judgments, tax liens, bankruptcy, foreclosure, deed in lieu of foreclosure, short sale.  The mortgage loan applicant then re-establish themselves and get positive credit history.  The mortgage lender will totally understand the period of bad credit the mortgage loan applicant has gone through and would most likely require a letter of explanation.  Hard working, financially responsible folks do go through periods of bad credit when they lose their jobs, businesses, go through a death in the family, go through a divorce, or have some other extenuating circumstances.  A short term period of bad credit or even a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale is not the end of the world and mortgage lenders understand this.

Re-Establishing Your Credit After Period Of Bad Credit

If you have gone through a period of bad credit due to a job loss, business loss, divorce, or other extenuating circumstances and now have re-established yourself, the best thing for you to do is to start re-establishing your credit.  Chances are that you will have a hard time to re-establish your credit or add positive credit if you currently have bad credit.  The best and fastest way of re-establishing your credit right away is by getting a few secured credit cards and make sure you religiously pay the minimum amount due each month timely.  Three $500 secured credit cards will literally do a world of wonders for you and it is the best way of re-establishing your credit and boosting up your credit scores.  Those three secured credit cards, if used wisely and paid off at the end of the month, can improve your credit scores by more than 100 FICO points in a period of 12 months or less.

Recent Late Payments

As mentioned earlier, a home buyer can get a home loan with bad credit as long as the bad credit history was an isolated incident.  However, if the home buyer has a ten year credit history and every one of those ten years has had a late payment and derogatory payment history, then the chances will be difficult for them to get a residential mortgage approval or any other loan approval.  However, if the bad credit history has been an isolated incident and the person has re-established themselves with new positive credit, then the mortgage applicant should have no problem in getting a home loan with bad credit.  Mortgage lenders will especially scrutinize the past 12 months payment history of the mortgage loan applicant.  One late payment in the past 12 months should not be an issue.  However, multiple late payments in the past 12 months can and will be a problem in getting a mortgage loan approval.

Gustan Cho


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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