It is not impossible to get a mortgage with bad credit. (Unnamed Copywriting)

It is not impossible to get a mortgage with bad credit.

With all the upheaval in the mortgage lending world, a lot of people just assume that it’s become impossible to for people to get mortgages with bad credit, but nothing is actually further from the truth.

It is true that the loans that most people came to associate with mortgage loans for people with bad credit are no longer available. When the housing market crashed, these were the first ones to go. The important thing become figuring out what kind of loans those were.

For years, is someone applied for mortgages with bad credit, there was a very large chance that they would end up being financed by a sub-prime lender. These companies were specialists at originating a mortgage for people with bad credit. It was their main source of revenue.

These companies actively pursued bad credit borrowers, and made it extremely easy to get mortgage loans with bad credit. They built massive lines of wholesale business based on these two facts.

In fact, they were so successful, that for the most part, the average homeowner began to associate these sub-prime loans as the only financing option for mortgages with bad credit. If a borrower had a bad credit score, they were conditioned to believe that a sub-prime loan was their only option.

These loans carried extremely high interest rates, and for the most part, they were adjustable rate mortgages, or ARMs. Homeowners who didn’t know how to get a mortgage with bad credit were invariably led down this path and assumed that those very high interest rates were their only option.

As these companies went out of business, most borrowers just assumed that it was an end to mortgages for bad credit borrowers. There was, throughout all of this, however, a less known option for bad credit borrowers, and it is still readily available.

The FHA program is not a new loan program. These are loans that are offered through the Federal Housing Administration and are insured by the Department of Housing and Urban Development. The FHA was created in 1933, and has been lending on homes ever since.

Throughout the peak of non-conforming and sub-prime lending, the FHA program was still offering mortgages for people with bad credit the whole time. Not only were they offering these loans, they were offering them at fixed interest rates well below any sub-prime rate available.

The loans are government loans, so they require a lot of paperwork, and strict adherence to certain underwriting guidelines. Because of this, most loan officers simply opted to take the easier route and go with the sub-prime loans. It was because of this that the FHA program was largely unaffected by the housing crisis. Most of the bad credit loans that went to foreclosure were held by the sub-prime and non-conventional lenders, as opposed to the Department of Housing and Urban Development.

For this reason, FHA loans are still being offered, and are still a very competitive financing option. Like before, they offer better interest rates than the loans they are competing against, but like before they still adhere to strict guidelines, and require a lot of work from prospective borrowers. For borrowers who are willing to work, however, FHA loans are still the best way for a person with bad credit to obtain a mortgage.