Bad Credit Home Loans Still Exist. Dont Be Discouraged Just Be Prepared!

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Author: Dewey Kearney

Article source: http://www.articledeshboard.com/. Used with author's permission.

With the collapse of the sub-prime (a.k.a. bad credit home loans) market a lot of people believe that buying a home with bad credit is completely impossible and are afraid to try. The one thing that the media isn't telling you is that this problem affected less than 20% of the sub-prime loans. That means that 80% of those loans are still functioning.

The mistake most people with bad credit make is that they try to get a loan from a lender (like Ditech or Lending Tree) that specializes in good to superb credit. So when they don't fit the mold and are turned down they just assume that no other lender will approve them and stop trying. People with bad credit need to work with lenders who specialize in bad credit home loans. These lenders have unique lending programs designed for people with bad credit.
That being said, here are some things you need to know to help you get the best home loan, no matter what your credit score is.

Know Your Credit Score

Before getting pre-approved for a bad credit home loan you should know your credit score and what it means. Also it is important that you check your credit reports for errors and repair those. If there are any major errors that are driving your score down contact a credit attorney (we recommend Lexington Law) and work with them to get these removed. The higher your score the lower the interest rate (which means lower mortgage payments too!)

You can get your credit report here: (Free Credit Report.com)

Although it is not impossible bad credit home loans have gotten a little tougher. And the higher your credit score the better your chances are that you will get approved for a home loan. Even with bad credit home loans there are interest rate fluctuations based on your credit score. That's why knowing your credit score, repairing your credit and dealing with a reputable lender are the most important things you can do!

Budget Yourself And Know How Much You Can Afford To Pay Each Month
Deciding what you can afford in payments is one of the most important things you need to do. In a recent MSN article by Liz Pulliam Weston, titled 8 big mortgage mistakes and how to avoid them she states, "Many people take out the biggest loan they possibly can, figuring that their incomes will eventually increase enough to make the payments comfortable."

Few first-time buyers really know how expensive homeownership can be. Even if you pay as much as you did for rent, you'll also need to cover property taxes and homeowners insurance, utilities, maintenance and repairs. Although the property taxes and insurance will be included in your house payment you still have to pay it.

Lenders in the past have been perfectly willing to let you overextend, knowing that you'll probably forgo vacations, retirement savings and new clothes for the kids rather than default on your mortgage. All that has changed. Especially with bad credit mortgage loans. So do a little budgeting and plan out what you can afford in payments.

Pre-Approval vs. Pre-Qualified

The key to owning your own home is to know which loan type is right for you and to be pre-approved, not pre-qualified, before you start house hunting! This is true for anybody purchasing a home, but more so if you are applying for a bad credit home loan.

Pre-qualified is the term a mortgage broker uses to tell you approximately how much you MIGHT be approved for. But since they haven't actually submitted your information to a lender it's just a "best guess." Pre-approval means a lender has approved you for a mortgage loan. With pre-approval you will know exactly how much home you can afford.

Here are the most common types of mortgages.

Basic 40-year Fixed Rate Loan
· This is for you if you plan to keep your home for more than 5 years OR you want to afford a higher-value home.
· Advantages: Lower monthly payments than a 30-year loan.
Basic 30-year Fixed Rate Loan
· This type of loan will work for you if you believe that interest rates will rise or plan to live in the home for more than 5 years.
Zero down/100% Loan
· This is a good loan if the home you've selected has potential equity value, is in a good neighborhood etc. but needs some fixing up.
· Advantage: Frees up more cash, helps buyers buy more house. If you are able to do the fixing up yourself you can save yourself a lot of money that will leave you more cash available for other things.

Make The Realtor Work For YOU, Not For THEMSELVES

OK. You've worked out a budget and know how much you want to make in payments. You've gotten pre-approved for a bad credit home loan. You're ready to work with a Realtor to find your dream home. But before you head out with the Realtor insist that you only want to see homes in your comfortable price range. There are always a certain percentage of homes that have incentives offered to the Realtor if they can sell them, so don't let the Realtor fast-talk you into more home than you can afford. OR trying to get a loan through "their" person to see if you can get approved for more money. You've got your budget! Stick with it!

Cleaning up your credit, budgeting yourself and getting approved from a lender that specializes in bad credit home loans are the most important things you can do to ensure you get the best interest rate and the home of your dreams (not nightmares because of payments that are too high!). So take a little time, do a little homework and soon you'll be a homeowner!

www.1-800BadCredit.com provides up-to-date information for people with bad credit. Providing auto loans, mortgages and refinance options, credit cards, credit counseling, personal loans, identity theft protection and advice & tips on saving, budgeting and getting out of debt. Founded by Dewey & Leslie Kearney who understand bad credit because they've been there too! www.1-800badcredit.com/bad-credit-mortgage-loans.html www.1-800BadCredit.com Site dedicated to helping you find credit solutions