Applying with Bad Credit

Mortgage lenders are permitted by law to review your credit report. Keep in mind that each lender will also have their own underwriting guidelines they follow. Those guidelines will determine your eligibility.

What the heck are underwriting guidelines? Underwriting guidelines are the criteria under which you will be approved for a loan. use the same term, when they evaluate you for insurance. Underwriting guidelines assess the risk you pose to the company. In the case of a mortgage the lender is trying to decide what the chances are that you will default.

What does this mean for you? If you have bad credit, you need to find a lender that has easier underwriting guidelines. The challenge is that most lenders, who accept a greater degree of risk in their loans, also charge a higher interest rate. So, if your credit is bad you will pay more.

The good news is that if you can establish a good payment history on your mortgage it will help your credit score to go up. Perhaps, when it's time to re-negotiate your mortgage you will have a better credit score and will qualify for a better interest rate.

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