How to Get a Home Loan With Bad Credit & No Money Down

Order a copy of your credit report. Getting a home loan with "really" bad credit is practically impossible. Check your credit before applying for a bad credit home loan. Even if you have bad credit, simple improvements can add 20 or 30 points to your score, which can result in a reduced interest rate.

Save money for closing costs. There are bad credit home loans that feature 100 percent financing. However, you'll have to pay your settlement fees or closing costs. Borrowers pay settlement fees at closing, and this amounts to 3 to 6 percent of the sale price. If you don't have the cash, mortgage lenders may agree to include the fees in the loan balance.

Anticipate a higher interest rate. People with bad credit obtain higher mortgage interest rates. What's more, people who receive 100 percent financing typically pay a higher interest rate. If you plan to purchase a home with a low credit score and no money down, expect to receive a high rate. Higher rates equal higher monthly payments, which limits your buying power. Borrowers with cash on-hand can agree to pay discount points at closing (one point is equivalent to one percent of the purchase price) and negotiate a lower rate.

Get a co-signer. Applying for a mortgage loan with a co-signer or co-debtor can help you obtain a reasonable rate on the mortgage loan. Pick a co-signer with an excellent credit history. As a co-signer, they're equally responsible for the debt.

Use a mortgage broker. There are several home loan programs that feature 100 percent financing. Mortgage brokers have access to various home loans. They can help you find a lender that offers bad credit home loans and no down payment loans. These may include FHA and other government loans...or first time home buyer loans.

Stay away from risky home loans. A mortgage lender or broker may convince you to accept a risky mortgage loan such as an interest-only or adjustable rate mortgage. These offer low initial payments and increase your buying power. However, future payments can double. Keep payments predictable by choosing a fixed rate mortgage.