Obtaining a Home Mortgage With Bad Credit

Your credit score may be lower than the ideal, but that doesn’t necessarily mean that you won’t be able to qualify for a home loan.

No credit is as terrible as bad credit. It can prevent the approval of home loans. This status can is associated with high-risk borrowers. Lenders usually avoid this type of client. It is necessary to improve your credit score significantly. If not, there is a big chance that your loan will not be considered according to average lending directives followed by banks and lending firms. However, having bad credit doesn’t automatically mean you won’t be able to obtain a home mortgage.


For persons with bad credit, one possible option is to use the Home Equity Line of Credit or HELOC. You can pursue a line of credit that has lower interest rates and deducted from any taxable income if there is equity in your property. This is, however, a risky move if you fail to repay the debt. Yet, it is an economical alternative provided you have regular income and discipline. Compare loan packages from different lenders to avail of the lowest rate.

Personal Loan

Consider a loan from relatives or colleagues if you have bad credit. However, think of this as a formal business transaction and not a personal favor. The agreement should be legally documented with provisions for accountability and payment terms. In short, your contract must contain the exact principal amount, interest charges, fees, period of amortization, and stipulations on the collateral. These are essential in case you fail to pay the mortgage. It is not worth ruining a family or close relationship just because of falling-out over money.

Obtaining a Home Mortgage With Bad Credit

Credit Unions, Cooperatives & Online Platforms

These institutions operate like banks. The difference is the union or cooperative is owned by the members. As a non-profit organization, it passes along the earnings to members through good service and reduced fees. Online platforms permit borrowers to get loans from individuals. This system is also known as Peer-to-Peer form of lending. It became popular due to the efficient and simple process. It is also beneficial to borrowers with bad credit due to minimal interest rates. The same goes for investors who earn a great deal of money from the transaction.

How does this scheme work? The borrowers post a list of their preferred loan amounts and reasons for seeking the mortgage. The investor in turn review said listings and select the ones that conform to their criteria. P2P lenders check out all applicants and their credits which become part of the loan listing. Although credit scores remain a determining factor, the investor may be more concerned with the borrower’s status compared to banks. This is a good choice for persons with bad credit.

Loan Co-Signer

Individuals with bad credit can always ask somebody who is prepared to co-sign your home mortgage. This person trusts you and your capability to repay the credit. This is a big deal for co-signors since the loan becomes their full responsibility in case of the borrower’s default.

Study each option watchfully and look for one that will be appropriate for you. Just the same, strive to increase your credit scores and avoid too much use of credit cards.

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