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Bad Credit and Mortgage Loans

Bad credit mortgage is something that is made to sound like a criminal activity. A credit score is based on a huge range of data including the number of accounts active, the balances on those accounts, the status of all accounts, the total amount of debt and the individual's history with credit. A credit score is something used by the financial industry to represent the amount of "risk" a lender or bank faces when providing money or funds to a consumer. At some point in time it was decided that the "golden" number in credit scores was 700 or more. Though no one stops to explain why 700 is the required number, it is something that all consumers are encouraged to aim for.

If someone does not have such a figure on their credit report it can make it difficult to get credit cards, loans or other offers for funding. This, however, does not mean that someone with a low score should automatically assume that they are unable to obtain a mortgage in order to buy a home. What it does mean is that they might have to accept some limited options or even use some creativity to buy their first home.

Some unique approaches to purchasing a home, even with bad credit mortgage loans, include owner financing, assumable mortgages, leasing to own and zero down loans. Additionally, there are many special mortgage programs for people in urban and rural areas which can help those with lower income or poor credit to gain access to good mortgages.

Let's look at the unique options - owner financing is a formal and legal arrangement which allows the original owner of a home to serve as the "bank" and all mortgage payments go to them. This sort of arrangement will never take a buyer's credit into consideration at all and allow them the opportunity of acquiring a home without any traditional mortgage documentation.

An assumable mortgage will allow someone to "step" into the middle of an existing mortgage, take over the payments and assume ownership. This does require a hefty lump sum investment however and might not be an answer for everyone.

Leasing to own is a very desirable arrangement for someone with bad credit because it allows them to enter into a formal arrangement with a property owner under which they are leasing the home for a set period of time after which they will obtain a mortgage and buy it outright. The great thing about this is that the seller reports the rental agreement to all of the credit agencies, instantly improving the buyer's credit score, and also puts aside some of the lease payment towards a down payment on the home.