Getting Approved for a Home Loan with Bad Credit: Start an Action Plan

by Gabriel Traverso
CMR Columnist

Getting a home loan today with bad credit is getting tougher. Most mortgage brokers and lenders are tightening their loan requirements and applying stricter standards to new home loans.

Bad Credit Home Loans

The mortgage business is changing and many lenders who specialized in working with the bad credit segment are now suffering or filing for bankruptcy. To get a home loan now you will have to do more preparation work to make sure you get approved and get the best possible mortgage rate.

What You Need to Do to Get Your Home Loan

Here are some of the top steps you need to take in order to get approved for a mortgage with bad credit:
  1. Take the time to clean up your credit before applying for a home loan. Resolve any collections and late accounts and dispute any inaccuracies.
  2. Save up for a down payment. Most mortgage lenders are limited in the loans they can write to borrowers with little or no down payment. Most zero-down programs now require good credit.
  3. Write a letter of explanation. Lenders are quite accustomed to stories of lost jobs and medical emergencies. Whatever the cause of your bad credit, provide a detailed written explanation of your circumstances. It will make your lender's job easier.
  4. Shop around. Once you have started cleaning up your credit and have saved up for a down payment you are ready to apply for your home loan. Ensure your chances of getting a good deal by getting loan offers from multiple mortgage lenders.
It may take longer than you'd like for you to get a home loan, but with bad credit in today's market your options are fewer. Take the time to do things right and start taking steps now to get your home loan.

About the Author
Gabriel Traverso is a freelance writer, professional musician, and artist. He resides with his family in Reno, NV.

© 2008 CMR. All rights reserved.