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Bad Credit Mortgage FAQs

There are many reasons why individuals have bad credit.  With the current economy you may have been laid off from your job or you may have incurred some serious medical bills.  No matter the reason you fell behind in your payments, having bad credit does not mean you can't qualify for a bad credit mortgage on a home loan or a mortgage refinance.  The following FAQs will help you understand more about what a bad credit mortgage is: 


1. What is the definition of a bad credit score?  Conventional Fannie Mae, Freddie Mac, FHA or VA loans require a score above 620.  Even a credit score above 620 is not an automatic qualifier if you have too many late payments during the past 2 years. 


2. What is considered a bad credit history?  When payments have frequently been more than 30 days late for a period of time you will have a bad credit history. 


3. Can I get approval for a home loan with a bad credit score or history?  Yes, if you meet certain other criteria, including a stable income. 


4. Will my interest rate be extremely high?  Your interest rate on a bad credit mortgage will be higher than on a conventional, FHA or VA loan; however, all loan rates are lower than they were 10 years ago. 


5. Will I need a large down payment?  Yes.  The requirements for a bad credit mortgage loan or mortgage refinance are generally higher than for a traditional loan. 


6. What is the waiting period to get a home loan after a foreclosure? You will have to wait a minimum of 3 years to get an FHA loan. 


7. What is the waiting period to get a home loan after filing for bankruptcy?  Depending on the type of bankruptcy, you may be able to get into a loan after just 2 years, or even 1 year if there are extenuating circumstances. 


8. There are late payments on my current mortgage; can I qualify to refinance?  If your late payments are less than 30 days late, they will not show up on your credit report.  Even with a payment that is 30 days late you may be able to qualify for mortgage refinancing.  Lenders will look at other things such as cash reserves, income, job stability, amount of debt, and so forth. 


9. What if I owe more on my current mortgage than my house is worth?  If you are upside down on your mortgage, you will not be able to refinance, but you may qualify for a loan modification to help reduce your payment. 


10. What type of documentation will be required? While documentation varies, you may need a photo ID, 2 months recent bank statements, income verification, and possibly tax returns.