How to Find a Bad Credit Mortgage

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By Elizabeth Weintraub. Home Buying/Selling Expert

Elizabeth Weintraub has an extensive background in real estate spanning more than 30 years, including experience in related industries such as title and escrow. She is a full-time broker-associate at Lyon Real Estate's midtown Sacramento office and is recognized as a top producer. She is also a Life Member of the Master's Club, an honor bestowed by the Sacramento Board of REALTORS®, and ranks in the top 1% of all the agents at Lyon Real Estate.

CA BRE License #00697006

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If you just completed a short sale. you might want to wait 2 years before applying for a mortgage because you'll get a much better rate if you wait. Fannie Mae guidelines say a short sale seller can qualify in 2 years for a loan as long as the seller maintains good credit after the short sale .

Even if you've filed bankruptcy, as long as you keep your credit squeaky clean after the discharge, you can probably qualify for an FHA loan in a couple of years. FHA loans don't necessarily carry credit score minimums. but the lenders who fund the loans do want a minimum FICO score .

Tips for a Bad Credit Mortgage

Make sure you check out the mortgage broker with your state's licensing board and deal only with a reputable company. Do not get a hard-money loan through a loan shark. Following are some tips for taking out a bad credit mortgage:

  • Think of the bad credit mortgage as a temporary solution. Make it short term. This does not mean get a short-term loan, but plan on paying the loan no longer than 2 years before you build up your credit enough to get a decent refinance .
  • Consider

    an adjustable-rate mortgage. Your interest rate will be high for a fixed-rate amortized loan. much higher than the rates you will find advertised online at websites such as You will most likely pay higher discount points. too. By getting an adjustable-rate mortgage, you should be able to keep your mortgage payments low enough to be somewhat manageable.

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  • Do not agree to a prepayment penalty. A prepayment penalty means you could pay as much as 6 months of additional interest if you pay off the loan early. Since most of your payment is interest and not principal, that's like paying an extra 6 months of payments. Don't do it.

Alternative Options to a Bad Credit Mortgage

Work with a mortgage broker to shop for the best loan available without having to resort to a bad credit mortgage. The first option is to work on repairing your credit.

  • Get a free copy of your credit report. Examine it. If you see a mistake, write to the credit bureaus and ask for a correction.
  • Ask your mortgage broker about submitting you for a rapid rescore. Your mortgage broker can help you to repair your credit or refer you to a reputable credit repair company. Then a rapid rescore through your mortgage broker might considerably increase your FICO score in a relatively short period of time. Rapid rescore is a mortgage industry secret tactic.
  • Consider a co-signer. For example, FHA guidelines will allow a co-signer on your loan. Maybe your parents or another relative could co-sign for you and you could avoid a bad credit mortgage.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.


Category: Bank

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