How to Get a Mortgage Loan Even With Bad Credit

List: Posted: 12/10/10

These days, it’s very difficult to buy a home with bad credit. Lenders just aren’t willing to take risks on subprime mortgages. Subprime simply means that you’re riskier because of your income, credit history, or credit score. If you have bad credit, it’s still possible to get a mortgage loan, though. One of the best ways to do this is to use the FHA’s lending program.

The Federal Housing Administration has a special mortgage program for home buyers with bad credit or little credit history. It’s particularly popular for first-time home buyers, and those who are recovering from previous foreclosures and bankruptcies that established bad credit.

Basically, with this program you still get a mortgage loan from a bank. The bank will overlook your bad credit for one reason: the FHA program guarantees you. This means that if you default on your loan, the FHA will pay the bank. Therefore, the bank feels more comfortable investing in you even if you have bad credit.

With an FHA loan, you can’t have terribly bad credit. You do need to show that you’re financially responsible now, even if you had some problems in the past. You only have to put a small amount down on the home, too.


When the FHA acts as your mortgage insurer, you’ll pay a little more on your monthly mortgage payments, but this will help to clean up your bad credit. This is a small price to pay for being able to get a mortgage on a home that was otherwise unattainable.

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