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Bad Credit Mortgage FAQs

 

Bad credit can be overcome. You may still be able to qualify for a mortgage refinance or a home loan if you have bad credit.  Here is a list of 10 Frequently Asked Questions about a bad credit mortgage. 

1. Can I be approved for a home loan if I have bad credit?  

Yes, if you meet other compensating factors, which include job stability

 2. What constitutes a bad credit score?  

A score below 620 will keep you from qualifying for a conventional Fannie Mae, Freddie Mac, FHA or VA loans. Even with a score of 620 or higher, you may not qualify if you have excessive 30-day late payments within the last 24 months reporting on your credit report.  

3. What is the waiting period after a foreclosure?  

 If you have had a foreclosure, you will need to wait  

4. What is the waiting period if I filed for bankruptcy?  

There is a waiting period of three years from the time the bankruptcy is discharged until you can qualify for a new loan. 

 5. Will my interest rate be high?  

The Interest rate for a bad credit mortgage is higher than a conventional or government-insured loan.  Right now, even bad credit interest rates are lower than they were 10 years ago.   

6.  I have late payments on my mortgage; can I still refinance? 

Late payments are not reflected on your credit report until they are at least 30 days late.  Even if you have a 30-day late payment on your credit, you may still qualify for a mortgage refinance or home loan.  Lenders will look at other compensating factors to determine overall credit worthiness, such as cash reserves, time on job, income, debt, etc.  

7.  What type of documentation will I need to show? 

The type of documentation required varies. Be prepared to provide government-issued photo id, social security card, at least two months of bank statements, income verification (such as Y-T-D paystubs).  If your income doesn’t come from w-2 employment, two years signed tax returns with 1099s attached may be required.  

8. Will I need a down payment?  

All government-insured loans require a down payment.  The down payment requirements for a bad credit mortgage are higher than conventional mortgages.  

9. What if I’m upside-down on my current mortgage?  

If you owe more on your current mortgage than what your house is worth, you won’t be able to refinance.  You may qualify for a loan modification to reduce your mortgage payment.  

10. What constitutes a bad credit history?  

Bad credit history is when you have repeatedly missed loan payments for a period of time.   

 

  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure

 

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