Nowadays, more people are trying to buy a house due to the historical low interest rates. But millions of Americans are still saddled by the financial meltdown that occurred not too long ago. If you’re one of those that walked away from your mortgage obligations, or you just paid the monthly premiums late, the following tips might just help you secure a bad credit mortgage loan.

If you’re asking yourself, if it’s still possible to get a home loan with bad credit? The answer is yes, but you do need to clean up your finances to make the mortgage process more favorable to you. Most bad credit mortgage lenders you approach will be aware of your poor credit profile, but there are steps you can take to make your finances look not so bad.

According to FHA bad credit guidelines, just because you missed a few payments in the past, does not mean you cannot get a new mortgage loan, even with a lower FICO score. From recent Federal regulations, FHA loan approvals for people with bad credit is still possible, with some timely financial clean-up on your part

Before you even think about applying for a mortgage loan with your bad credit rating, you’ll need to know about the following financial metrics before the bank does.

Know Your Credit Report Status

Just assuming you only have a few late payments or blemishes, is not the way to go, if you’re looking to score a mortgage loan. Luckily, you’re entitled to get a free credit report once a year, as per federal regulations. You’re also entitled to a free credit report, if you recently got a denial letter from a creditor.

Write to the credit agency listed in the letter, and request your credit report immediately. It might be best, if you examined all three reports from the major bureaus. You can get your free credit report for free once a year by going to www.annualcreditreport.com or by simply calling 1-877-322-8228.

You’ll Need to Dispute Erroneous Information

If you want your application for a bad credit mortgage to go smoothly, you’ll have to fight for removal of some inaccurate information from your credit file. The easiest information to get altered in your favor, are those from creditors you have paid off, or are no longer in existence.

If you have several late payments from a credit card company, and you have a zero balance, just write the credit agency and dispute the late-payments, as recorded. The lender in question have so many days to respond, before the credit agency is required by law, to correct the inaccurate information in your favor.

Even if you only get a few late payments information corrected this way, your FICO score would be impacted positively. You can also use the same method to fight late payments from creditors you’re presently paying on time.

From my experience, most creditors would not bother to reply to the credit bureaus inquiry if your loan is paid off, or presently current with timely payments. Give it a try, the positive results might just surprise you!

Can You Payoff Delinquent Accounts?

It’s very hard to get any bad credit mortgage lender to grant you a home loan, if you’re not able to pay other creditors. If you have outstanding delinquencies, your chances of securing a bad credit mortgage is very minimal at best.

To increase your chances for approval, you’ll need to payoff those past due debts, or make a payment agreement with some timely payments showing on your credit report. When mortgage bankers see you’ve made at least one year consistent and timely payments, your chances of getting a mortgage with poor credit increases substantially.

Know Your Debt to Income Ratio

With a high level of debt as compared to your annual income, most mortgage underwriters would by-pass your mortgage loan with a quick negative answer. Your current annual payments for debts owed, should not be more than 12 to 15% of your yearly income. That is why it might be better to seek a poor credit mortgage for a two to four family dwelling, instead of a one family dwelling.

For multi-family housing, the additional units would produce income that can be added to your current job income. The higher your annual income, the better your chances of getting your home loan with bad credit approved.

Stay Away From New Debt

Nothing makes a bad credit mortgage lender more suspicious, than an applicant with numerous credit inquiries all within the past few days, weeks or months. During the mortgage underwriting process, and until closing, it’s wise to stay away from applying for any type of other loans, like credit cards or department store cards.

Each credit inquiry, helps to lower your credit score. If you notice on your credit report, new inquiries from credit card lenders that you did not initiate, dispute them right-away to have all of them removed from your credit profile. All the major credit agencies are known to honor this type of request rather quickly.

Final Thoughts

Mortgage bankers are not created equally, and you might run across one with a negative answer, before coming across one with a positive answer. It’s best to keep at least two bad credit mortgage lenders within reach, as the home buying process unfolds.

Try your best to clean up your credit profile, and have ready-made excuses for any negative information that’s still holding your FICO score down. If you can, make an arrangement to start paying past due debts, before applying for any type of bad credit mortgage.

Try to secure mortgage approval first, before going house hunting. With a pre-approval letter, you can score a better deal from a home-owner looking to sell, before the market goes down.

You can still buy a house with bad credit, provided you take some pro-active steps to get your financial affairs in the best positive light, right before the mortgage banker comes calling.