Some mortgages, lending programs, work for borrowers with bad but not terrible credit. Your rate actually improves as you develop a good payment history, and your good behavior is reported to credit bureaus. Whatever program you choose, ask if they report your payment history to credit bureaus. You don't want to carefully rebuild your credit only to have no one see it!
Treat Your Bad Credit Problem with a Band-Aid Mortgage
If you refinance into better terms and perhaps consolidate debt, you need to concentrate on improving your credit and finances over the next two years. A bad credit mortgage is not a good long term solution. Avoid really long term fixed rates and prepayment penalties longer than two or three years. An ARM fixed for two or three years should get you on your feet. Improve your credit and move to a good credit mortgage in two or three years.
Treat your bad credit mortgage loan as a temporary solution to a problem, repair your credit, and move on. Don't let bad credit and bad credit mortgages become a way of life for you.
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