Getting a home loan when you have bad credit may seem impossible, especially if you don’t want to pay a very high interest rate. However, mortgage loans are different than other unsecured lines of credit because they use your home as collateral. That actually makes getting approved for a mortgage easier than getting approved for a low-limit credit card. If you’re shopping for a mortgage loan with bad credit, read this article for tips on getting approved.

Make an Educated Down Payment

When you apply for a mortgage loan, your lender looks at something called your LTV ratio. LTV is the amount of money you are borrowing divided by the value of your home. For example, if your home is worth $100,000, and you are borrowing $90,000, then your LTV is 90%. 100% LTV’s are generally reserved for borrowers with near-perfect credit. However, the lower your LTV is, the more likely you will get approved for your mortgage. Most lenders rarely decline loans with an LTV at or lower than 80%.

Clean Up Your Credit Report

At least 30 days before you apply for your mortgage, obtain copies of your credit report from all three major reporting agencies and check each for errors and inaccuracies. Having the reporting agencies correct errors and inaccuracies on your credit report is one of the fastest ways to raise your credit score. Additionally, make an attempt to pay all of your creditors on time in the months prior to applying for a home loan.

Shop Around For a Lender

Some mortgage lenders specialize in lending to borrowers with poor credit histories. A good way to compare interest rates and terms between lenders is to shop online. You should always make sure that you are getting the best deal possible when applying for a home loan. Doing so could save you thousands of dollars over the mortgage term.

To see a list of recommended lenders for bad credit home loans or mortgage after bankruptcy lenders online, visit ABC Loan Guide.