Bad credit mortgages-how can you obtain a mortgage with bad credit? Do you think your bad credit is keeping you from buying a home? Think again. Mortgages are available for those with little credit or with bad credit. Did you purchase a home in the past and something bad happened to make you default on the loan? Now you think you will never buy another home again. Not true. There are many different options available with those who have bad credit, or just plain bad luck!

Since you already have bad credit you may be at a disadvantage in the mortgage industry, but you are not ruled out from playing the game. Some predatory mortgage lenders may be looking for those with bad credit to take advantage of them, so you need to know the basics of obtaining a bad credit mortgage so you won’t get taken advantage of when you buy a home.

The first thing you want to check on is your current credit ratings. New laws have gone into effect in 2005 that require credit ratings services to offer one free credit report to customers every year. If you follow that link you'll actually get to see all 3 of the major credit bureau reports (you do have to pay if you want to see your credit score). There may be errors on your credit report that are affecting your credit score in a bad way and these can be fixed with a simple phone call. You may have a past due notice on a utility bill that still shows you never made a payment, but you have. A simple phone call to the utility company asking them to retract the past due notice on your credit report can help bring up your score a few points. Even if you credit report is correct, being able to offer reasonable explanations to the loan officer or mortgage processor is really important.

You can also help your credit score by closing out unnecessary accounts like credit cards from department stores or ones you opened but have never used. Mortgage companies will look for the quantity of accounts you have opened, the length you have had them opened, how many past due notices were posted to your credit report, and how much money you currently owe. If possible, pay off any small debts that may show up on your report, because every little bit counts.

If you have bad credit, you may have little in savings to place as a down payment for a home. Today many mortgage companies offer lower down payments with FHA loans, first time buyer loans and bad credit mortgages. The disadvantage may be that you end up paying a higher interest rate since you don’t have as much cash to put down but this will not disqualify you. Another disadvantage is that the borrower will often end up paying private mortgage insurance (PMI) which insurers the lender in case of foreclosure. If you have bad credit, most likely a mortgage guaranty insurer will be necessary if you are putting down less than 20 percent, to insure the company in case of lose. The PMI will come out of the borrower’s loan, but is usually tied in with the entire cost of the mortgage.

Most FHA loans or bad credit mortgages will only require that the borrower puts down 3-5 percent. Remember that the more cash you can put down to start, the more this helps your interest rate and the type of mortgage you can afford. Keep in mind that there are a variety of mortgages available with anywhere from 30, 15, and now even 40 year mortgage terms. As well, you can choose from adjustable rate mortgages (ARMs) and fixed rate mortgages, so be sure to speak with your mortgage lender or broker about which type of loan is best for someone who has bad credit or little credit to begin with. Be sure to do your homework before getting started so predatory lenders don’t take you for a ride. As someone looking for a bad credit mortgage these predators may be looking for you!