The word foreclosure used to be like cancer, spoken in whispers as something too horrible for civilized conversation. Over the past few years that has changed. Foreclosure rates are constantly in the news and have become a part of everyday discussions in work and social situations. While more people are comfortable talking about foreclosures it doesn’t mean that they want to face one themselves. If someone has bad credit, they should probably put off getting a mortgage, otherwise they may find themselves in over their heads and more likely to lose their home.

Lenders look at a number of factors when deciding to approve a mortgage. An applicant’s credit report can tell them several things. The Debt To Income Ratio of the borrower is very important. It is a calculation of how much of the borrower’s monthly gross income is earmarked to paying off existing debt, including the costs associated with a home, such as rent or a mortgage and insurance. A bad ratio means that the applicant is carrying too much debt and is susceptible to problems should they experience even minor shifts in their income or expenses.

The other thing lenders examine is the applicant’s history of paying off debt. Late payments, missed payments, and charge offs are bad signs. Loans that default, previous foreclosures, and garnished wages also indicate a high level of risk.

There are institutions out there who will offer mortgages to those with bad credit, but they will usually involve extremely high interest rates and penalties in order to protect the lender. Loans like these got many people in foreclosure trouble and should be avoided. Borrowers with bad credit should instead work on fixing their credit and improving their debt ratio rather than buying a house right away.