The stigma associated with a bad financial history has left many people struggling to figure out how to get a mortgage with bad credit. From the bank's perspective possessing bad FICO ratings indicates personal financial management problems.

The banks view your less than perfect credit history in two ways: it is a result of the economic times where income is limited, that you faced unemployment challenges or it is the result of one's unhealthy spending when compared to saving strategies.

The bad economy you cannot be expected to control, only to plan for. The second way a broker looks at low credit scores is that you simply do not manage your money wisely and this prevents an obstacle to their approving your new loan.

Regardless of what caused your bad scores, people are struggling in the current financial climate, especially homeowners.

The possibility of getting financing is low for people who possess poor credit, but not impossible.

To learn how to get your financing approved, read on...

Preparing For The Home Loan Application Process

There is no avoiding the fact that people with a good credit history, clean of bankruptcies, foreclosures, repossessions and the like get offered the best lending deals. The difference in mortgage terms, approvals and interest, is because of the perceived risk of the borrower. Because a person's ability to pay is often established by reviewing one's credit history, the possibility of repayment is deemed low with people with low scores.

For both first time homeowners and current ones who look to get financing to buy a new home, the following tips may help you get a home loan approved.

Bottom line, is it possible to get a mortgage with bad credit?     YES.

Get a real time value appraisal. Getting financing approved requires scrutinized shopping to get the best deal. Mortgage lenders abound in the land but only a few of them offer bad credit loans for a variety of reasons. Be prepared to take some time to find a bank willing to work with your unique history. For more information you can reference the FTC's mortgages guide. When applying for financing with bad credit, acknowledge that you may not find a lender willing to work with you immediately. When you do find a lender, honesty and a willingness to complete the demands of the process are essential ingredients to success. If you give up after the first problem in the process, its your loss. The escrow process always has problems, expect them, and be flexible..

Review your credit records. Knowing that you have a bad FICO is just the starting point. There has to be reasons why you had financial missteps. Recall the times when your credit was impacted and remember to be honest. A bad credit history is sometimes influenced by the environment, emergencies, and situations outside of your control. Be truthful with yourself, about the causes. Disclose everything..

Home lenders will often consider the reason why a borrowers credit was ruined. This means that although the rating indicators are not favorable, they still resort to other approval criteria and will take the explanation into consideration. Reviewing your report lets you prepare explanations and address your past -- it may make a difference.

Spit Polish Clean Your Personal Finances

Aim for financial stability. Exude a demeanor of being able to repay the loan throughout the application process. Prove this by disclosing your job details and how much income is coming in to the household. Truthfully. Outline your money management plan detailing how your loan repayment amount will be paid while paying for your other bills in a timely manner. A stable income is essential in making a lender consider your application for approval because it reassures the bank that repayment terms can be met.

When self-employed, the constant influx of money will need to be documented and proven. In financial terms, you want your Debt to Income Ratio to show strongly - the proportion of your income in relation to your other debts.

Additionally, debt consolidation lenders should be considered to reduce your high interest revolving debt and improve how your finances look on paper. Paying off high interest credit card balances and replacing them with a longer term smaller monthly bill improves your stats. You lower your total monthly debt service and at the same time, preventing interest from getting the bulk of your money.

Learn your options. There are two types of loans: the Fixed Rate Mortgage and the Adjustable Rate Mortgage (ARM).

The Fixed Rate Mortgage is the conventional loan type that banks provide where repayment is applied to the principal and the interest of the loan at a fixed rate from the day you sign on the dotted line.

Adjustable Rate Mortgage is another type of loan arrangement where you are the interest rate is adjustable, or will change with time based on the prime rate. The structure of your financing can vary so be clear what is being offered by your broker.

Both types of lending offer advantages and disadvantages. ARM loans are cheaper with a lower interest rate than can be had with a fixed rate loan, but over time locking in a low interest can save you thousandsif you opt for a fixed rate. Let your current needs dictate. Pull out the your trusty calculator and crunch the numbers. A lot of online resources are available detailing the pros and cons of fixed vs adjustable financing.

Help To Get Bad Credit Loans

Consider borrowing from the government. The Federal government, through the Department of Housing and Urban Development (HUD) has a variety of lending programs on offer. This is in addition to the programs offered through chartered lending agencies offering assistance financing to induce home ownership. Because the goal of these programs is to make affordable housing accessible, flexible first time buyer programs can help reduce costs for the borrower. Note; Government lending has its own unique qualification standards that can make getting approved very difficult, even though poor credit is often accepted. The paperwork can be a challenge.

Go online. Web resources are available online allowing you to compare customized rate quotes from multiple lenders in minutes. The lending terms vary but they work hard to make borrowers welcome as appreciated customers. The online mortgage lenders use competing strategies to win your business, this can lead to more value being passed on to you as they fight for your business. Well known sources like LendingTree can make the process easy. Compare internet offers for the best deal.

Make your financial preparations. Putting money down is usually required for people getting financing. Expect for both the down payment and your interest rate to be high, period. It is part of the reality we must live until your credit is restored. Prepare to meet the costs of homeownership--insurance, maintenance, home improvements, utilities, private mortgage insurance (PMI), ensure that you can pay these bills. Make sure it won't be a struggle before you commit.

Get a co-signer. A person who trusts you and who possesses excellent credit can co-sign your financing application with you. This gives the impression that the borrower is intent on making payment on your mortgage which is reinforced by the co-signer's cooperation and records. Be aware, this puts your trusted co-signer on the hook for the loan in the case you default, potentially ruining their credit.

Consider Lending Altnernatives. Mortgages offerings for people with low scores are limited, there is no sugar coating it. Consider owner financing opportunities and creative home buying strategies outlined in our bad credit house buying options guide.

The Bottom Line

Because lending policy varies, the above recommended strategies serve as a best practices to ensure an easy and speedy loan approval. There is no set in stone technique on ways to get a mortgage with bad credit approved 100% of the time, but understanding what the banks look at is the first step to success..

See our recommended financing options for people with low scores, they offer some of the most flexible options to get financing available, see your online rate quote today...