The Mortgage Loan (DOC)

							                         The Mortgage Loan With Bad Credit


1. Get a credit report, and not the free kind! Your credit report reveals a lot about your

   credit history, some even incorrect. The free kind gives you all the information about

   your debt history, but a paid version includes a FICO score. The FICO score is the

   magic number that accounts for some 80-90% of the mortgage loan decision.


   The scores range from 350 (awful/terribad) to 950 (superduperawesome). If your

   score is 350-499, you’re better off moving home with mom, rather than getting a

   mortgage loan. Even at 500-619, your credit score is so poor you can end up with

   $200,000 extra interest paid.


   Knowing your credit score will allow you to visit lender websites and see what you’ll

   qualify for in terms of their interest rates. Most lenders have this information

   prominently displayed (and most of the time it’s a scary thought to get a home loan

   with 20% interest rates).


2. Review your credit report for errors. If you find erroneous entries, follow the

   instructions with the reporting agency to dispute the transaction. Every entry affects

   your credit in a different way. Removing even one bad credit entry can raise your

   credit score 50 points (lowering the bad credit interest offering by as much as .05%,

   which can be $50,000 in interest).

3. Configure you debt to income ratio. Excluding utilities, create a ratio of your total

   monthly debt divided by your total gross monthly income. If this figure is above 36%,

   you’re in the nono area of credit risks. Ideally you want this score to be around 28%.
   Pay off and close low limit credit cards, wait to apply for a mortgage loan until you

   have a chance to reduce your debt to income ratio.

4. Learn about the different types of loans and which are beneficial in your situation.

   Check into the terms “ARM” “FIXED INTEREST RATES” and other terminology. There

   are literally hundreds of ways a mortgage loan can work and sometimes getting a

   bad credit mortgage loan will be approved with only fixed or ARM rates. Each lender

   has their own standards.


   Understanding how to get a mortgage loan with bad credit will, I hope, make you

   consider repairing your credit before the application process begins. Repairing credit

   is fairly easy and very productive. A year of secured card payments may save you

   thousands of dollars, as will reducing your debt to income ratio.