Got Bad Credit? You Can Get a Home Loan

By Karen Lawson Columnist

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If you've had credit problems, don't rule out the possibility of getting a home loan. Mortgage brokers, lenders, and real estate agents are in business to make loans and sell homes, and they know that many people face credit problems.

In the mortgage lending industry, sub-prime credit is the term used to describe borrowers who don't meet standardized underwriting requirements. Underwriting is the process mortgage lenders use to qualify you for a home loan. If you don't meet the usual requirements, you may still qualify for sub-prime financing.

Alternative Financing Options for Sub-Prime Credit

Banks and mortgage lenders may be able to offer you a home loan if your credit scores and present income meet underwriting requirements. If you've had serious credit problems, such as a bankruptcy or foreclosure, you may qualify for financing after a specific period of time has passed and you've re-established some good credit. Sub prime financing can cost extra, so shop around for the best possible deal. Your lender may ask you to provide a written explanation of the events leading to your credit problems. If you no longer have credit cards, your lender may ask for proof of utility payments or other verification of paying bills on time. Whatever caused your financial problems, it is important to have control of your finances when you're planning to buy a home.

Budgeting for Emergencies

Financial problems often occur as the result of unexpected situations such as major illness or long term unemployment. It's easy to make a bad situation worse by using credit cards to get through tough times. Owning a home involves extra costs for repairs and maintenance. It's a good idea to establish savings for unexpected expenses. Owning a home is an important step toward financial stability.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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