Selecting a mortgage can be a difficult task. First of all, you need to decide which mortgage would suit your needs best.

For those who want to know what their monthly outgoings are going to be, should look at a fixed rate mortgage, as these are mortgages that are set at a fixed price for a certain period, which can be anything from 1 year to 5 years.

A variable mortgage is just that, its a mortgage rate that changes (or varies) with the base rate. So if the base lending rate increases so does your mortgage rate, however the positive aspect of this type of mortgage is that if the lending rate lowers so does your mortgage repayment. This is not for all as there is an element of risk involved (this was true back in the late 1980s, when unfortunately rates rocketed as house prices tumbled)

You may also need to think about a repayment mortgage or an interest only mortgage.

The difference is that the latter does just that, it only pays the interests, so whilst your monthly payments will be less, you will still have the capital to settle at the end of the mortgage duration. However a repayment mortgage will be a little more expensive, but at least you will be paying off both the capital and the interest, which means ultimately your mortgage is reducing.

When you have agreed which type of mortgage suits your lifestyle then dont be afraid to shop around whilst you are still tied to a contract as there is usually a set time when you have the ability to negotiate another rate andor go to another lender who is offering you something cheaper.

I would always suggest that in todays competitive market that you shop around, as there are lots of different lenders with differing rates, and you need to find the right one to suit your budget and lifestyle.

For most people, applying for a mortgage loan to buy a house is one of the biggest and the toughest lifetime financial exercise. It gets even more difficult for those who have had a bad credit history. Even though people with bad credit are at a disadvantage, lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the best but which at least provide them with an opportunity to own a home.

In order to get the best possible mortgage options, a borrower has to impress upon a lender that in spite of a bad past, he is financially responsible. To convince the lender of your credibility, the foremost thing to do before applying for a mortgage loan is to start clearing the red flags that mark your credit report. Begin by reducing your credit card debts as much as possible. Similarly pay off other debts like car loans or auto debts, particularly if they have more than 9 monthly installments left, since auto debts with less than 9 payments are generally excluded from debt calculations.

The next best thing to do is start saving big for a good size down payment on your home. Since you fall in the bad risk category for a lender, the bigger the down payment, the more it assures the lender of being able to recover his cash in the event of a future default. Do remember to include closing costs when saving for your down payment as they can add as much as 3% to the purchase price. Overall, saving more than 20% of the total purchase price should improve your credibility.

The borrower should target and reduce his monthly liabilities to less than 50% of his total income in order to give confidence to the lender about his ability to repay his mortgage loan without any defaults. It is never to late to get into better financial habits, like reducing the use of credit cards and postponing large purchases. At this point of time, it is wise to hold on to your present job and not make any unnecessary jumps. A steady employment of over two years adds to your image as a consistent and stable person.

Lenders will go through your bank statements to figure out your expenses and incomes. Any unusual entry may raise question marks. If a friend or family member gifts you money to help you purchase your house, make sure the lender know it is a gift and not another loan. Reveal all your liquid and cash reserves that you own since lenders judge your paying capacity from them and generally prefer that they have at least two months reserve of the monthly mortgage payments.

Last but not the least, even factors like prompt payment of house rents, phone bills, insurance premiums and other financial bills add to your credit worthiness. Finally, even after you have spruced up your credit image, make sure to approach more than one lender and compare their lending terms and conditions in order to get the best mortgage loan.

When I worked as a loan officer, it wasnt unusual for me to come across people who thought they were out of luck because they had bad credit.

This is really not the case, although it is fair to say that you would not be able to walk down to your local bank, have a seat in the branch managers office and walk out with a mortgage.

However, there are alternatives, and you do have choices.

If you contact a broker, tell them your situation, be completely honest and up front with them, otherwise you are just wasting their time as well as your own, and believe me, whatever your situation may be, they have heard worse. Nine times out of ten they will be able to help you.

Conventional banks are not the only ones that lend money. Brokers have access too literally hundreds of banks with a wide variety of programs for people in unique situations from foreclosure buy outs, to 100% financing with poor credit scores.

I speak from experience, because when I was a loan officer I did mortgages for people in unique situations.

Foreclosure buy outs, bankruptcy, late payments on prior mortgages, the list goes on.

I would sit down with my customer, take down as much information as possible, than present their information to many different lenders for them to review. Most times I would find one with a program to help my customer.

Keep in mind, with unique situations, there is risk involved on the part of the bank, so you cant expect to get the best rate in the world. But if it is reasonable, and can put you into the situation you want to be in, than it is well worth it.

So if you think your credit, or a bad situation is preventing you from getting a loan, think again, there is probably a program out there for you, you have nothing too loose.

Your lender uses your home as security for your mortgage payments. This means that if you do not make the payments, they can take your home. The process they use to take your home is called foreclosure.

If you are behind on your payments, it is important that you act quickly to prevent foreclosure.

What should I do if I am behind on my house payment?

Call your lender Most lenders do not want you to lose your home. Tell them why you are behind on your payments. Ask them to work with you to get your payments current.

Dont ignore letters from your lender Let them know youve received their letters and that you want to work with them.

How your lender can help

Your lender might accept a payment plan for the back payments or give you extra time to pay the loan.

What if my lender wont help?

You still have options:

Call another lender. Ask if they will give you a new loan to pay off your existing mortgage.

Sell your home. You might get enough money from the sale of your home to pay the loan off and even have money left over.

Talk to a lawyer. Ask if filing for bankruptcy can help you keep your home.

The foreclosure process

Foreclosure begins when you get a Notice of Default in the mail. The Notice of Default tells you that you have not made your payments. It also tells you the amount you owe in missed payments and foreclosure fees.

You have 3 months from the date the Notice of Default is recorded to pay the back payments and fees. You can find the date the notice was recorded on the first page next to the words recorded on. If you pay the amount on the Notice of Default, the lender cannot sell your home.

When can they sell my home?

If you dont pay the amount owed within 3 months, your lender can sell your home. Before they sell your home, your lender must mail you a Notice of Sale. The Notice of Sale will include the date, time, and place your home is to be sold. The notice of sale must be mailed to you at least 20 days before the day they plan to sell your home.

How do I stop the sale of my home?

You can pay the amount due, including fees, up to 15 days before the sale date.

If you wait until the last 5 days before the sale, you will have to pay the entire loan amount.

Once you pay, the lender must record a Notice of Rescission. This proves that that the sale has been cancelled.

Watch out for scams!

Avoid people who promise to stop the foreclosure by having you transfer title of your property. Transferring ownership does not stop the foreclosure. You will still be responsible for the money you owe even if you no longer own the home. Also, it will not keep the foreclosure from showing up on your credit report.