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Bad credit does not have to be an impediment to getting a loan and a mortgage, however it can make things much more difficult for you to do so. If you intend to buy a house after an unfortunate mark on your credit such as a foreclosure or bankruptcy, then you will have to have a bit more cash up front than you would if you were trying to finance a house with good credit.

Getting the loan
The first step is to get pre approved for a mortgage loan from a sub prime lender. Check with many different lenders to get the best rates, and don’t be afraid to shop around. Once you have a loan picked out, you can hopefully go home shopping without having to worry about where the actual money for the mortgage is coming from. Be aware that you may need to pay more up front for a sub prime loan, and that your monthly payments will likewise be higher. You may also be required by your lender to pay more in fees at closing. This is because you are considered a high risk, and the lender wants to get their money’s worth out of you.

The housing market is slipping, meaning that you can buy cheap, but you may not be able to get the true worth of your current home out of a sale. A good option, if you are willing to consider it, is keeping your current house as a rental. Another great option is buying a house to “flip”, meaning that you buy a perfectly good house, turn it into a better house through remodeling, fresh paint, and landscaping as necessary, and resell it at a higher rate. Both of these can turn you a great profit, even in a low market. But can you afford to do either?

We’d like to help you answer that question! Every area is different, and a lot of money in Texas might boil down to a condo in some areas of California, so how do you know how much house you can even afford? One of the first things that you should do is look at your equity. You don’t need an appraisal yet, but do estimate the current value of your home and look at what you estimate your equity to be. The ideal amount is enough for closing costs, which you can find with the aid of a calculator on many lenders’ sites, enough for ten to twenty percent of the cost of the loan for a down payment, and a little bit extra to cover emergencies like extra closing costs being tacked on or the dryer falling off the moving truck. Don’t forget to keep some cash on hand for moving if you plan to use a professional company!

If you are worried about paying your bills from month to month because of credit card debt or another loan that just feels as if it is getting out of control, then do not just pass the debt back and forth from card to card. If you own a home, then there is a way to use the value of your house to help you get out of debt. This method comes in the form of a home equity loan or a home equity line of credit.

What is home equity?
Home equity is the term for the value of your home less the amount of money that you still owe on it. The value of your house is not determined by how much you paid for it, but by the actual appraisal value of the home. This means that increasing home values in your area and payments on your mortgage could make your home equity loan even larger, and remodeling or other home improvements could also help improve the amount of cash that you can get out of a home equity loan.