If you are worried about getting a mortgage loan with a low credit score, you are not alone. With the recent economy, the number of people with bad credit is larger than ever before and the financial community is recognizing the needs of this large market segment. There are ways where you can qualify for a mortgage loan even with bad credit.

A bad credit score does not necessarily mean you cannot own a home. Many lenders are hesitant or unwilling to make loans to applicants with low credit scores. Some lenders are allowed to approve only small loan amounts to people with bad credit. From a lender's perspective, the risk assessment determines whether or not they can make a bad-credit loan. Today, the financial services industry includes a significant number of lenders who cater to the sub-prime market. These brokers and lenders will take on the higher risk of financing mortgages for borrowers with bad credit or low income. Since these lenders take a higher risk by providing mortgage loans to bad-credit borrowers, they expect a greater return in terms of higher interest rates and higher fees.

If you have bad credit, here are some tips on how you can obtain a mortgage loan. First, you need to recognize that the bad credit score has happened due to specific reasons. Some of these may have been completely beyond your control, leading to financial emergencies, debt, missed payments etc. Irresponsible financial behavior can damage your credit rating even before you fully understand the importance of good credit. Once you recognize the reasons behind the low credit score, put together a sound plan to remedy your credit score and achieve your financial goals. This will take some time to show up on your credit rating so start as early as possible. Put together a plan to make sure your finances are clean and well organized. Lenders will be more inclined to give you a loan if they see evidence of responsible behavior, especially for some months. Some things you can do to build up better credit are paying your bills on time, making more than the minimum payment on credit cards, and making sure your spending is under control.

Next, check your credit score. Obtain a copy of your credit report from all three major credit bureaus to see if there are any inaccuracies in your credit report. If there are any incorrect items, report them immediately. You can improve your credit quickly by removing any inaccurate data. Do not apply for new credit cards, car loans etc for at least two months before your mortgage application.

Try to make a down payment on your mortgage. If you don't have the money right away, see if you can borrow from family or friends.  Lenders are more likely to extend you a loan if you can put some money down, even if it is a small amount.

Select a lender who specializes in bad-credit mortgages. You can find these subprime lenders through mortgage brokers or on the internet. Sites like mortgage101.com can be good resources to start your search. Most likely, you will be charged a higher interest rate. However by making payments on time, and building up your credit score, you can refinance to reduce your monthly payments.

Shop around and obtain rates from multiple lenders. Use internet based brokers or services that pull rates from various mortgage lenders for comparison. This way you can get multiple quotes with a single credit inquiry. Check for excessive closing costs or prepayment penalties. If prepayment penalties cannot be avoided, choose an option with the shortest penalty term.

Negotiate openly with the bad-credit mortgage lenders. Ask them to give you a lower rate or better terms. You can negotiate by explaining to them how you are making sure your credit score is repaired.

With some discipline and focus, you can own your home and repair your credit too.