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How to get a mortgage with bad credit

Finding home loans for bad credit can be difficult, but it is not impossible. While lending standards have tightened considerably over the past few years, there are still banks who are willing to work with consumers who have low credit scores. While it is true that today most banks require candidates for mortgages to have great credit, a good credit score, and an excellent payment history on all other loans along with a low amount of loans altogether, a lot of these “requirements” can be worked around or ignored if you know how.

Banks are willing to make home loans for bad credit, but only if borrowers are willing to meet certain conditions. Although there is no hard evidence to support this, anecdotal evidence suggests that most banks will require a potential borrower to provide a large down payment. According to many news reports (, a minimum of 20% of the property’s selling price will need to be provided by the borrower. In some cases, down payments as high as forty percent are asked for.

There isn’t much that someone with bad credit can do to get around this requirement. Since even people with high credit scores are now being required to make down payments, it can be very difficult to get a bank to waive this requirement. There are several FHA programs, however, that can loan funds to meet this requirement.

In addition to this requirement, potential borrowers with bad credit should also expect to have additional money in an escrow account. This money is used to show the bank that they have an emergency fund that can be tapped in the event that they are unable to make mortgage payments. Depending on the banks, this money can be spent or used immediately after the mortgage is approved, or it might be required to stay in an escrow account for a set amount of time.

It is possible to find mortgages that do not have these requirements, but be prepared to take a long time getting approved. At the very least, banks that do not require a large savings account or down payment will require you to provide at least three years of income statements. In many cases, they may also expect you to purchase private mortgage insurance. These policies will protect the bank in case you default on the loan.

It is possible to find a mortgage when you have bad credit, but you will have to go through a lot of hassle to get one.

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