- The bigger your down payment on a home, the better your chances of getting approved for a mortgage even with credit issues. Conventional loans require a 20 percent down payment. On a $200,000 mortgage loan, 20 percent would amount to $40,000. Because most people can't afford this type of down payment, lenders may accept a lower down payment, perhaps 10 percent of the sale price. Selling your current home and using the money from the sale may provide enough cash for a down payment.
- Down payments are only one aspect of getting a mortgage with credit issues. Even if you have enough money for a down payment, a mortgage with bad credit may entail higher interest rates. A high rate on a home loan can increase your mortgage payment significantly. According to Bankrate's mortgage calculator, a $200,000 house with a 5 percent interest rate has a monthly payment of $1,073 (minus taxes and insurance). This same property with an 8 percent interest rate costs $1,467 a month -- nearly a $400 difference.
- Mortgage loans provided by the Federal Housing Administration can help you get a home even with credit issues. While other lenders require credit scores in the high 600s and 700s, FHA mortgage loans have a 620 minimum credit score requirement, and the FHA will approve your application two years after a bankruptcy and three years after a foreclosure.
- Another big factor impacting your ability to get a mortgage with credit issues is income. Documenting your income and providing tax returns, paycheck stubs and other income sources are necessary to prove you're able to make the home loan payment. Lenders will vary in terms of their requirements. But having enough income may compensate for a lower credit rating. And if you've rented in the past and have never missed a monthly payment, a reference letter from your landlord may sway a lender's decision in your favor.
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