Bad credit history and obtaining mortgage loans


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Credit Card Applications » Research » Guides » Building Credit History » Bad credit history and obtaining mortgage loans

Bad credit history and obtaining mortgage loans

Updated: December 26, 2012

The content is accurate at the time of publication and is subject to change.
Having a bad credit history is not a good thing but at times unavoidable. Bad credit history means difficulty in obtaining mortgage loans and purchasing a home becomes difficult but not impossible. There are many ways to work around the problem if one has a bad credit history. There are many variables that come into play while purchasing a home in spite of having a bad credit. First, all factors will be taken into consideration and reviewed thoroughly before determining if the person is eligible for a mortgage or not. It is not as if a person with a low credit score will not be eligible for a mortgage, but there are other factors that will be considered. For instance, the persons recent negative credit history as well as the number of outstanding payments, etc. Hence one must be proactive and try to rectify the bad credit history as soon as possible as this would enable them to get the mortgage that they desire. A few tips to follow: • In order to obtain a mortgage one would require a down payment. Hence it is better to save money for the down payment. Financial institutions respond favorably to those who make a bigger down payment. • Obtain a copy of the credit report from all of the three credit reporting agencies. A customer is entitled to obtain one report per year at no extra cost. • Check the credit documents thoroughly and report any errors immediately. Send a letter to the credit agency if the information is incorrect or if there are discrepancies in dates, account type, balance, or any other information that is incorrect. • Make notes and review all three reports carefully. Now make three different lists such as the positive accounts held, negative accounts, as well as the negative paid offs. Make a note of the amount owed on the negative account. Give a reason for all the negative accounts that have been paid off. Loan officers will demand an explanation for having the negative account. Make a list of the positive accounts as well. • Take a closer look at the amount owed. There will be no mortgage loans available with outstanding balances. Exceptions are made only with medical accounts sometimes. Consult with a loan officer before paying off the balances on the medical accounts. If there are outstanding balances on other accounts other than the medical accounts, then consult with the creditors and offer to settle the account. However, do not disclose you wish to purchase a new home as lenders are aware that in order to buy a home the whole amount has to be paid. Try and pay off as many outstanding balances as possible. • Have a frank discussion with the loan officer as he is the only one who will be able to guide you by reviewing the financial information and by providing additional tips. The loan officer will know the credit situation as well as the negative accounts. You can then work on the down payments as well as in building positive credit before applying for a mortgage loan.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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