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If you have bad credit due to bad decisions in the past you may assume that your dream of home ownership will never become a reality, but this may not be true. More and more lenders are opening the door to those that have poor credit because they think they deserve a second chance. While you may not find that getting a mortgage is as simple as your neighbor who has excellent credit, it is definitely doable.

Mortgages and Bad Credit

Twenty years ago those with bad credit would be hard pressed to be approved for a mortgage loan. But today it is very common as lenders have had to relax their rules and regulations a bit to reach a wider audience. But with bad credit, you may still have a tough time finding a lender. You will find the process a whole lot easier if you know what to expect.

First, expect to be declined by many people before you get accepted. When you apply for a loan there are going to be several things that you will need which include: your name, your address, your social security or tax payer identification number, as well as your last tax return. You may also need to provide proof of a bank account, depending on the lender. Since you have bad credit you may also be asked to get some additional references. You will be able to obtain letters of credit or reference from most utilities, which will basically state that you are a customer and you pay your bill. You may also be able to obtain a letter of reference from your school if you have loans with them or even personal references of people who have lent you money in the past.

When you have bad credit you may be able to get approved for a mortgage on your own or you may have to ask someone to co-sign with you. A co-signer is allowing for you to borrow their credit score to help you get approved for the loan. While this seems like a simple answer, you need to remember that if you default on your mortgage you are not only hurting your credit, but the credit of your co-signer. So you need to be sure to discuss this with anyone that you ask to co-sign on the loan with you.

Another way to obtain a mortgage loan with bad credit is to have a down payment. Sometimes you will need to have as much as 15 to 20% of the sales price to put down on the home. This shows the lender that you are serious about keeping the home and when they know that you have invested they assume that you will keep your end of the deal by making timely monthly payments. Whether you have a co-signer or a down payment you will find that you can secure a better interest rate than if you don't do either of these things. If you don't have a co-signer and you need a loan for 100% of the purchase price you can expect for your interest rate to be as much as 5% higher than the average.