Getting a Home Loan With Bad Credit in 2011 - Still Possible?

It's 2011, and getting a home loan has gotten harder. And if it's harder for even the 780+ FICO club, you KNOW it's going to be harder for your poor credit.

But that doesn't mean there aren't lenders out there who would love to give you a loan. Just as there are people who deviate from the "average" credit rating, there are lenders who deviate from the "average" requiremenets.

Years ago, I was a mortgage consultant and loan officer. While I haven't been directly involved in that industry for years now, I still know a thing or two that can help put it into perspective for you how to best maximize your chances of getting approved for a good refinance or purchase loan when you've got less than stellar credit.

First of all, I must urge you to be cautious.

As much as some banks just plain won't deal with people who don't have good credit, there are others that actually delight in serving people with "bad credit." In fact, those in your situation are often the most profitable prospects they have.

Why? Because they can use your credit as an excuse to give you sketchy or questionable loans that make them money hand over fist in interest, but are not good for your checkbook.

Did you know reputable, large nationwide banks sometimes actually own smaller lending divisions set up to serve unfavorable loans to sub-prime borrowers under a different operating name?

I don't mean to scare you, because if you know what you're doing, you actually have the upper hand when applying for a mortgage. Even with bad credit.

You see, mortgage bankers and brokers make a lot of money when they close a loan with you. No matter who you are or what your credit report looks like, the person you're dealing with secretly wishes he could make a deal with you.

So when you apply for your loan, don't let them play any psychological tricks on you where they act like they're doing you a favor. You're the one who has the power here. If they don't give you a loan that makes you happy, then they don't get paid!

Now that we've gotten that out of the way...

What's the Best Method for Shopping for a Home Loan for Bad Credit to actually get a good rate?

You know what I used to hate as a loan officer?

I hated it when a prospective loan customer I was talking to had used a service that sends his purchase or refinance loan specifications to multiple mortgage brokers.

Why? Because that prospective customer had a lot of options. I was then forced to give them the best interest rate possible to compete, and that would lower my commission.

I must admit, I was younger and greedier back then. Looking back, I should have been happy to give my customers the lowest interest rate that I could.

But the banks "tempted" me with promises of extra wads of cash for "upselling" people.

Anyway, my point is that when the person you're talking to knows that you have multiple options, you're much more likely to get favorable treatment to keep your business.

There's another aspect to all of this, too.

When you have bad credit, you should avoid going directly to any specific lender. Why? Because each lender usually has their own specific set of guidelines which they use to determine interest rates and such. There's not much flexibility.

If you go to a mainstream lender, chances are they are not very good at providing competitive rates for those with bad credit.

What you need to do is leverage a mortgage broker. A broker has the power to match you with one of many lenders, to make sure you get a "good fit" for your loan profile. This, in theory (if your mortgage broker is good) land you with a more favorable loan than you would get otherwise.

Now, Let's Combine Those Two Points Above and Come Up With One Solution for Getting a Home Loan With Bad Credit at a Hopefully Favorable Interest Rate

I explained why you should avoid going straight to a lender or bank. They lack the flexibility to deal with your unique credit situation.

I also explained why you need to have a diversity of choices. Even a broker can rip you off if they know you're the only one they're talking to.

Both of those problems are solved by using one of the many services that match you up with various mortgage brokers.

That way they all know that they're competing against each other, and will work harder to compete for your special loan.

I'm proud to have partnered with LendingTree, one such company which provides the exact service I illustrated above.

When I was in the mortgage industry, we got a lot of our leads from LendingTree. And my observation was that we tended to give better rates to those who used Lending Tree because the competition forced us to.

The thing is, it doesn't cost you anything to use their service, either. They get their money from the mortgage brokers, not you. And then you save money while the mortgage brokers fight for your loan.

That's basically how it works.

Click Here to Go to LendingTree's Official Website