Home Loans and Mortgages With Bad Credit

I bought my first home over 20 years ago in 1985. Unfortunately because of a divorce I had to sell it within months, but I sure wish I could have held onto it. Even with very little credit to qualify for a home loan, we were able to get a loan for $105,000 with house payments only $900.00 a month (that was when interest rates were high) I didn't have bad credit at that time - just very little credit but still managed to secure a home mortgage.

My second venture into home ownership was in 2003, and this time we purchased a new home, in an area that was pretty high priced. This time our mortgage was for quite a bit more, but we still qualified with an average credit rating. We didn't have bad credit, just average credit, but were able to get financing for a home mortgage through Wells Fargo, who had pretty stringent guidelines (probably why Wells Fargo has survived this mortgage crisis pretty well - they are pretty conservative in their lending practices)

So now am in a position of having bad credit and needing to get a home mortgage refinanced. (this is on a home that I inherited and had taken a mortgage out on)

Due to a struggling business in these hard economic times, my credit has gone from average to now pretty bad . I made a common mistake that small businesses sometimes make, instead of having our business as a corporation, we operated as sole proprietors (and in doing so had to end up taking bad credit ratings from our business into my personal credit file)

Which is a little tip for those running a small business - make sure you at least set your small business up as a limited liability corporation - or an LLC. There is less personal danger and risk by doing so.

The loan I now have on my home is through a private lender (yes those types of loans are available) but has a very high interest rate (10.5%) A the time I took out the loan I went stated income only, with no credit check, and one of the reasons the interest rate was high because at the time it was a second home, and our business had hit the skids. So to prop up the business, I took a out a home loan to help our ailing business (mistake but hindsight is always 20-20, right?)

The one positive thing I did at this time however was I didn't take the loan that was offered to me - which was twice the original amount I had asked for (I had a lot of equity still) so even though the housing market has now tanked I am still sitting alright equity wise. Had I took the higher amount I would have gotten myself into an even tighter spot, which I'm now glad I didn't do.

So now I am in the unenviable position of having to apply and get a home loan with now bad credit. Being that we just closed our business, and our finances are still shaky while we get our feet back on the ground, I have started to research my options. Because the loan I have was just a 5 year loan, I am starting this process early so I can find out what my options are. Concerns are many as the economic crisis has hit the nation, but I understand that I am in the same boat as alot of other people, and I am grateful that I still have a home as I have seen many friends and some neighbors lose their house to foreclosure. Overextended, too many mortgages, heavy first mortgages with unrealistic adjustable rates and balloon payments, and job losses have contributed to them losing their homes and having to move to rentals or out of the area.

Some good advice about getting a home mortgage with bad credit from www.creditloan.com:

Finding The Right Lender:

"There are very few lenders and banks who deal in any kind of secured loans other than second mortgages. You might have to specifically look for a lender that specializes in secured loans. The best part is that you will not have to do much effort in order to search for them. The newspapers, the yellow pages and more recently the Internet are great places to start looking. In fact there are so many lenders who are listed in such places that once you look for one of them you will automatically receive a lot more offers from other similar lenders. But do not sign up for the first one that you come across. Make sure that you hunt around for the best rates. Compare the APR, the charges before you decide on which lender is the best."

So in conclusion, shop around. This is what I intend to do. When it comes to your home, make sure you understand the loan you are getting into and the consequences of that loan. Getting a home loan with bad credit is not impossible, but it is challenging. Just as I have to do, be careful, don't grab the first loan you think you might need. Research your options and make sure you deal with someone reputable!