When your credit has already been damaged, yet you still want to purchase a home, there are definitely programs available to you. These loans are called sub prime loans and there are many of them out there if you are in need of a poor credit mortgage loan. The truth is no matter what your credit situation, there is a loan for you, but it will cost you more. There are also many lenders that are ready to take advantage of people in this situation. To protect yourself from getting into a situation that will worsen your credit, it is in your best interest to educate yourself about your credit standing, especially if you need a mortgage with poor credit.
Your first step should be to order copies of your credit reports. All of the major credit bureaus allow you to order one copy of your credit report per year at no charge. You should order all three because the information can vary from one report to the next and you want to know everything that is out there. Once you receive them, review each one very carefully. Enclosed with your reports will be dispute forms. Should you find any items on your reports that do not belong to you or that you do not recall, you may dispute these items with the credit bureaus. They will research your concerns and should they find that you are not responsible for the items you are disputing, they will remove them. Once the disputes are completed, the credit bureaus will send you amended copies of your reports and you will know exactly where your credit rating stands.
There are two ways that you can go at this point. As mentioned earlier, there is a loan for everyone, but if you need a mortgage for poor credit, it will cost you more. You are going to require a larger down payment, sometimes in excess of 25% depending on your credit score. You will also be paying a much higher interest rate than those you see advertised on TV. If you are prepared for that financially, then you may proceed by contacting a mortgage company at that point and they can see where your credit scores are and find poor credit mortgages that are particularly suited to you.
The other way to go would be to begin to work on your credit. On the reports that you ordered you will find all of the creditors that have reported you for non-payment along with the amounts due. Going down the list, contact each creditor and discuss repayment options. In many cases you can offer them substantially less than you owe and they will settle your debt. As the negative items come off, your credit score will improve and that opens up better loans that you can qualify for with better interest rates and possibly less down payment money. This may seem to cause potentially considerable delay but unfortunately may be the price you have to pay to qualify for mortgages for poor credit.
You will need to have some good credit. Most lenders want to see at least five open credit lines in good standing. Some of these can be what are called non-traditional credit sources. You can obtain letters from places such as furniture rentals or daycare, anyone that you pay on a regular basis and on time. Submit these to the bureaus and they can add the good credit, also increasing your score. If you can be patient and let your credit score rise, you will get a better rate and not require as much money down. It will also be easier for you to refinance into a better loan sooner.
Either road you choose, it is possible to get a poor credit mortgage and achieve the dream of becoming a homeowner.