How Bad Credit Borrowers Can Still Get 100% Mortgage Financing

Summary

Mortgage lenders today have many more loan programs available today than in the past.

People from all walks of life, including those with bad credit, may still be able to get 100% financing.

Don’t think that you have to save up for a down payment because your credit is not very good.

Here are some tips on getting approved for 100% financing with bad credit.

Basics

100% financing usually requires a borrower to have a good background, including:

• Employment
• Income
• Assets
• Some kind of credit

Employment

This is one of the most critical parts of a borrower’s loan application.

Lenders generally prefer people who have had at least 2 years of job stability (continuous employment) in the same line of work and perhaps more years in the same professional field.

A track record of being in the same professional field for a long time is certainly a plus from a lender’s point of view.

Income

If you can document your income the lender will be more likely to approve your loan with bad credit.

Documenting your income involves offering proof of the level of income you declare on your mortgage application.

This can involve showing the lender:

• Recent pay stubs
• 1099s or W-2 forms
• Annual state and federal tax returns

A lender compares your income with your potential total debt load if they approve you for a loan. Your income needs to be high enough for the lender to approve you.

Some lenders only approve borrowers who have no more than 40% of a debt to income ratio, although other lenders will go over 50%.

Assets

If you can document your assets you should. This can involve showing the mortgage lender copies of your:

• Checking account
• Savings account
• CDs
• 401(k) statements
• Individual retirement accounts
• Other forms of savings

A mortgage lender will look more favorably on a borrower if they show assets. Many lenders require an applicant to have at least 2-3 months of “reserves”, which is the amount of money it takes to cover the mortgage and housing related expenses.

Credit

Even if you have bad credit there are still steps you can take to improve the situation.

Get a copy of your current credit report and look it over. If there are small old debts such as cell phone bills or other items that are cheap to pay off then do so.

You can then get the documentation from the creditor proving that you paid off the debt. This documentation can be supplied by to the credit bureaus to update their records and also to the mortgage lender.

Often times a mortgage lender may become irritated if you have lots of tiny collections due. They show up on your credit report, and lenders reason that if you can’t take care of these little items you may not be able to manage your mortgage with them properly.