Bad Credit Home Loans - How To Apply

This article is about bad credit home loans and how to apply for one.  When applying for a Bad Credit Home Loan, the first step is always an application to get necessary and pertinent information for the Bad Credit Home Loan Lender.   

Employment History

The purpose of an application is to get a job and employment history lenders always going to require at least two years of employment history for consistency with both job position, type of employment, type of job and type of income or pay structure.   Just like with any other mortgage, stability with the type of job and position is very important. Banks want to see that you have stability and consistency with the type of work that you do. Changing types of jobs or moving companies looks bad when you’re applying for a mortgage or really another type of loan.  It is just more important when you are trying to get a mortgage with bad credit.

So, you want to have some consistency with your job type, and if you need to move jobs make sure to stay within the same job type which means the same industry the same position and the same pay structure. So, if you’re currently selling cars then you moved to become a hairdresser then you will need 2 years of consistency in the current job anytime you switch jobs like that.   The bad credit mortgage lender is going to require at least one year worth of stability in the current job to make sure that you’re not going to go back to what you were previously doing.

Another very important thing with employment history when applying for a home loan with bad credit are job gaps.  That means if you are moving from one job to another make sure you don’t have any big gaps or times that you didn’t work between jobs if you’re jumping from one job straight into another job with maybe a couple of days or a week of not working then those kind of gaps are acceptable.  Anything more than that and the bad credit mortgage lender with consider it an inconsistency with your job stability.

Income

the second important part is going to be income and the amount of income you’re receiving monthly from all sources.  This will determine the amount of home sales price you will be able to purchase. So just like with employment history stability, income history stability is also important when you’re applying for any type of bad credit home loan.  So what that means is if you are a standard W-2 employee then they’re just looking for a two-year history of getting paid that way. Self employed people or independent contractors are typically getting paid on a 1099, so that means that they are allowed to deduct many items on their tax returns.  So, with 1099 income the amount you are paid is not necessarily the amount of taxable income after your deductions have been applied.

 

Most bad credit home loans will take a two-year average of 1099 income.  1099 income can be very seasonal and be somewhat inconsistent and can, therefore, go up and down.  And, that is the reason a two year average is required for any 1099 income.

Bad credit home loan lenders with also treat commissions, bonuses, and overtime as seasonal and inconsistent.  They will again take a two year average and use that amount only.

Again, any type of changing pay structures from W2 to 1099 is going to require a two-year average.  Consistency is required in order to determine, number one. that you’re going to stay in that type of job and pay structure and not go back to what you were doing previously and then of course an average that you’re making.  

The industry averages show that in many cases people who switch over from a W-2 position to a 1099 or 100% commission position do not do well and can not survive.  They are not used to the position and they’re not used to the pay structure and not used to the fact that all of their income comes from their efforts only. Therefore many people will not do very well and want to revert back to a W-2 employee.  

Down Payment / Funds

Another very import item when applying for a bad credit home loan is your money for a down payment and your funds to close.  So this means to show the bad credit mortgage lender where your have your money saved for your down payment and for possible closing costs for your total funds to close on a home .  All Bad credit Home Loan lenders require that you show exactly where the money is coming from the guidelines have gotten stricter over the last 6 to 8 years and require a very clear paper trail on where the money is saved or coming from.

Since these bad credit home loan lenders are providing alternative programs for bad credit home loans, then they require that you come up with your down payment and funds to close.  They will typically NOT allow down payment assistance to be used.

Cash and undocumented funds are never acceptable when applying for a mortgage with bad credit or a bad credit home loan.  A paper trail has to be provided for all money involved, and cash will never be allowed to be used for your down payment for your closing costs.   So any money or funds in a checking or a savings account needs to have been in there for at least 60 days. 60 days shows ownership of the money and to the bad credit home loan lenders and nothing further is required to be used for down payment and closing costs for a home loan.   

So there are always mortgage options for poor credit.  With our Credit Repair and improvement program is designed to improve your scores quickly and permanently in order to have more options for home loans.  If you are asking if there are mortgages for bad, then the answer is yes. But, these loans have other requirements on top of a standard mortgage loan.

Applying for a mortgage with poor credit or bad credit is the same as any other loan, with the differences being what type of loan program you qualify for and this will determine your options for loans.  We can make the entire process easier for you by providing several options for credit repair and improvement that will improve all aspects of your financial life, not only a home loan.