Bad Credit Loans

Generally speaking, in today's mortgage world, if your middle credit score is below 640, you are going to have a very difficult time obtaining a home loan. I didn't say impossible, I said very difficult. The further below 640, the harder it will be. For example, a 620 might still make it for a conventional loan, but under 620, that option goes away.

If you are below a 580 credit score, it is almost impossible to qualify for home loan financing no matter what anyone tells you, or what you read on the internet. Again, I didn't say no, I said almost impossible. You would need at least 10% down payment, and maybe higher. If you don't have that, don't even bother trying. While many lenders and loan programs appear to take lower credit scores, understand that credit score alone does not get you approved. With scores that low, you usually have plenty of other things on your credit report that will get you denied regardless of score, like recent late payments, foreclosures, etc.

FACT: Credit score alone does NOT equal a loan approval

With a score below 580, you really should save yourself the hassle. Stop attempting to find mortgage loans, and work on improving your scores instead. Once you have achieved a 620 or higher score, you should be in much better shape. If you are denied by a one lender, contacting 10 more probably won't help.

Basic Late Payments

If your credit has multiple RECENT 30, 60, or 90-day late payments, you probably won't qualify. Especially if those late payments occurred LESS THAN than two years ago. Lenders want a clean recent payment history. Check HERE for some general criteria used within the lending industry when you have late payments.

Collections, Judgements, and Tax Liens

If your credit history indicates unpaid collection accounts, most "A" grade loan lenders will require these amounts to be paid off before the loan is funded. FHA typically will ignore them if they are under $2000, and more than 2 years old. Medical collection "usually" are ignored. Judgments' (you got taken to court & lost), are always REQUIRED to be paid off before you can get a mortgage loan.

Bankruptcy

• If your bankruptcy is more than 2-year old, you can usually be approved for an FHA loan with as little as 3.5% down.
• If your chapter 7 bankruptcy is older that 4-years, and you have good re-established credit, you may now qualify for an standard conforming loan.
• If your chapter 13 bankruptcy is 2-years after discharge date and you have good re-established credit, you may now qualify for an standard conforming loan.
• If your chapter 7 bankruptcy is 2-years after discharge date and you have good re-established credit, you may now qualify for a VA loan.
• If your chapter 13 bankruptcy has at least 1-year of on time payments, you may now qualify for a VA loan.
• If your chapter 7 bankruptcy is 3-years after discharge date and you have good re-established credit, you may now qualify for a USDA Rural Development Loan.
• If your chapter 13 bankruptcy has at least 1-year of on time payments, you may now qualify for a USDA Rural Development Loan.

Foreclosure

• If your foreclosure Sheriff Sale Date is OVER 7-years old, you may qualify for a standard conventional loan.
• If your foreclosure Sheriff Sale Date is OVER 3-years old, you may qualify for an FHA loan with as little as 3.5% down payment.
• If your foreclosure Sheriff Sale Date is OVER 2-years old, you may qualify for a VA Loan with Zero Down Payment.
• If your foreclosure Sheriff Sale Date is OVER 3-years old, you may qualify for a USDA Rural Development loan with Zero Down Payment.

Short-Sale or Deed in Lieu

• If your short-sale date is more than 4-years old, you may qualify for a conventional loan
• NO waiting period after a foreclosure for an FHA Loan if you had NO late payments on ANY mortgage or consumer debt in the 12-months proceeding the short-sale AND it was NOT a strategic short sale.
• If your short-sale date is more than 3-years old, you may qualify for an FHA Loan loan
• If your short-sale date is more than 2-years old, you may qualify for a VA Loan with  zero down payment
• If your short-sale date is more than 3-years old, you may qualify for a USDA Rural Development loan with zero down payment

Extenuating Circumstances

The granting of shorter waiting periods to get a mortgage loan is available for many of these loans for extreme extenuating circumstances - BUT it is VERY RARE.

• Non-recurring events way beyond the persons control that result in sudden, significant, and a prolonged reduction in income, or catastrophic increase in financial obligation, like serious illness or death of a wage earner are generally acceptable.
• Unemployment, loss of job, prolonged strikes, medical bills not covered by insurance, divorce, and the inability to sell a property due to job transfer DO NOT qualify as an extenuating circumstance

About the ONLY qualifying extenuating circumstance is DEATH of the primary wage earner, or well documented extended and serious illness of the primary wage earner.

High Debt Ratios

If your income-to-debt ratios are too high, you can either reduce your personal debt (i.e., pay down your debt), obtain a debt consolidation loan, pay down your debt with funds from the sale of personal assets (boat, camper, etc.), select a lower interest rate ARM loan, or add a co-mortgagor. If your debt-to-income ratio is over 45%, your odd's of getting approved are very slim.