If you're looking for the secret of how to get a $500,000 mortgage with bad credit, you're probably going to be disappointed to realize there isn't one. Having bad credit means that companies look at you as a financial risk, and in today's questionable economic climate, even qualified applicants are being turned down for mortgages. However, it is possible to get a fairly reasonable mortgage with bad credit. Here are a few steps that may help you:
- Avoid predatory lenders and high-interest scams. Unethical lenders, much like unethical borrowers, are everywhere. Predatory lenders are likely to promise you'll be able to get a $500,00 mortgage with bad credit, only to then hit you with 50% interest rates. Other forms of predatory lending include those who play to your desire to obtain a mortgage with bad credit, convince you to take a larger mortgage than you can afford, and profit from the situation when you inevitably default on your mortgage. The sub-prime mortgage crisis that hit the United States in 2008 and is still causing thousands of foreclosures every month had its roots in these practices. Arm yourself with information. Even if you're eligible for a mortgage with bad credit, do your research before accepting. There are legitimate companies that help borrowers obtain a mortgage with bad credit, but there are also some disreputable ones. If something seems too good to be true, it usually is.
- Find a co-signer. Applying with a co-signer can sometimes help you get approved for a mortgage with bad credit. If your co-signer has excellent credit and a long-term relationship with a lending institution, you're even more likely to be approved. Just be sure that the co-signer will not look to be taking out loans on his own behalf in the near future. Co-signing for your loan increases his outstanding debt load, and he's not likely to be approved for additional credit for some time. However, it's a good way to help you get a decent rate on a mortgage with bad credit.
- Ask a family member to take out a mortgage on your behalf. This is risky, of course, since the mortgage applicant would be responsible for payments even if you decided to default on your payments. However, if your credit is truly appalling, this may be the only recourse for getting a mortgage with bad credit. It's wise to avoid asking anyone who isn't a parent, sibling, or spouse for this sort of favor, since the risk to them is quite large and based upon mutual trust.
- Improve your credit. This may seem self-explanatory, but if you have bad credit, it may not be the perfect time for you to purchase a new home. You can improve your credit by addressing the issues that have given you poor credit in the first place. Debt consolidation, negotiating settlements for outstanding debts, and hiring a law firm to dispute entries on your credit report are all viable ways to improve your credit. In 12-18 months, you'll likely no longer be in the difficult position of seeking a mortgage with bad credit, and will save a ton of money on interest rates.
While there's no magic solution to the problem of obtaining a mortgage with bad credit that won't bankrupt you with obscene interest rates or predatory lending practices, there are things you can do in order to obtain a mortgage with bad credit. Whatever tactics you choose, making sure that you honor your obligations and pay your debts is of primary importance. If you are in a situation where you can't do this, it's best to hold off on seeking a mortgage.