Part of the home buying process for someone with bad credit is finding a qualified lender.

Just like not all banks will lend to someone with bad credit, thus not all loan officers have the experience or know how to adequately represent the concerns of a home loan borrower with credit problems.   You need to make sure you do your research before you commit to using one lender.

Working Directly with a Bank Loan Officer Or Working With A  Loan Broker

Its actually better for you to work with a loan broker who has access to a lot of different loan programs and lenders.  A loan officer at a bank tends to be tied to just the programs offered at THAT bank.  While a broker (most NOT all) have access to a lot of different lenders and loan programs.

When you are “credit challenged” you want to find the best program to fit your credit situation.  There is no point in applying for a home loan thru a bank that only deals with good to average credit.  With a loan broker, they should be able to match you with a program that fits your situation.   But keep in mind that not all loan brokers have access to the same programs.  Its a good idea to talk to several brokers and get a “feel” for one that understands you, your needs, and the particular challenges created by your credit score.

Dealing With Loan Officers

If you decide to work with a loan officer.  Make sure they can approve someone with bad credit.  Walk into their office with your credit reports already pulled!  Make sure you have all 3 credit reports available so they can get an IDEA of what your credit looks like.  When they pull your credit, the score will probably be different, but by letting them see what you are working with , they can tell if they have a program to fit your needs.  If they don’t have the time to look over your credit reports, move on.  Anyone who can’t take 15 mins out to review your credit report and put you at ease, doesn’t have the time to EARN your business.  Just because you have bad credit doesn’t mean you should settle for anything less than their best customer service.

Dealing With Loan Brokers

One of the most important things to keep in mind when working with a broke is that most of the time they are paid 100% on a commission only basis.   And even though they may have access to dozens of bad credit home loans, they may be more inclined towards a program not because it fits your needs, but because it pays them better!   Most will not disclose what they will get paid for doing the deal,  but you need to make sure that you tell them you will be speaking with several brokers to see who can find them the best deal.  Again give them the folder with your 3 credit reports in it and have them look it over.   Take notes on the programs available.  And try to talk to at least 3 brokers before you choose one.

Don’t Forget Your Local Credit Union

An often overlooked source of financing is the credit union.  These some of the larger credit unions  tend to be more flexible in their lending criteria.  They WANT to make loans to their members.  If you don’t currently belong to a credit union, you should see look into joining one.  You would be surprised with how easy it is to join one.  They aren’t all tied to big companies anymore.  Some credit unions are available to anyone living within a certain area.  You can also reach out to family to see if anyone has access to one.  They are usually also open to family members, and you don’t even have to be a close family member!

No Guarantees

Some mortgage lending companies do not always look after a borrower’s best interest. Despite Federal Laws that aim to protect consumers such as the Truth-in-Lending Act, the Fair Housing Act and the Real Estate Settlement Procedures Act, consumers are not guaranteed  protection from predatory lenders and possible fraud.

For this reason, borrowers must be aware of how to protect themselves from unfair practices or fraudulent activities. There are a lot of lending companies out there and it is not an easy task to choose the right one without taking time. It is a must for borrower to compare each lender. Try to pick at least three prospective companies and get as much information about them as you can.

How to find a Good Home Loan Lender

Don’t hesitate to ask questions about lending requirements and procedures. Be sure that you understand all information. Request quotes and don’t just focus on the interest rates being offered.

Be on the look out for additional fees.  Get EVERYTHING in writing before you sign  anything.

If a lending company refuses to entertain your questions, this is a clear sign that you should take your business somewhere else. Don’t  sign up with a lender who offers a low interest loan but refuses to give you an estimate of all other costs. Most lenders try to bait customers by offering small interest rate only to charge them with higher “processing fees”, “administrative fees”, etc.   Then sometimes they even have it in their paperwork that they will TRY to get you that low rate, but they don’t guarantee it. Be a wise borrower and study your lender carefully before entering into an agreement.