How to Get Mortgage Loans With Bad Credit
There are many people today who would want to own their own home and avoid all the troubles that come with renting. However, that thought seems like an impossible achievement because their credit rating is poor. You can nevertheless get mortgage loans with bad credit if you just followed a few tested steps and ensured that there are some things in place. What do we average? Getting a mortgage is not a walk in the park and is not for the unprepared. And so in this article we try to offer every help we know to help you get a loan approved.
One of the dominant calculating factors before lenders would give you a mortgage loan is a good credit score. However, it is not the only factor. Having a stable job with a steady income flow and other assets can persuade lenders to give you a mortgage loan already if you have bad credit. You see edges do not have problem with giving you a loan if you can prove to them that you are capable of paying back their money, with any interests.
And when it comes to a mortgage, it already becomes more basic because typically the amount of money involved is big. So although you may have bad credit, if you can prove to lenders that you can repay the loan, then you stand the chance of being approved. And we have these 5 that will help you in the time of action.
1. Why do you have bad credit?
The first thing lenders would ask you of or check when it comes to reviewing your application is your credit rating. Yes you may know that you have bad credit rating but have you taken some time to find out why that is? So here’s what to do:
Get erroneous information on your credit report removed. Inaccurate data concerning your credit behavior on your credit report can bring down your credit score. Get your credit report and if there are inaccurate entries, inform that credit reference agency and do so in writing. When you do that you give them the strength to look into the entries you are disputing.
If the creditor cannot prove that they are correct, the agency will remove it from your report. This alone will make your rating go up. Usually all these would take about 60 days before the new or corrected info will appear on your report.
2. Determine the amount of debt you are carrying.
So you corrected mistakes on your report and nevertheless you have bad credit. That’s OK. Let’s take the next action. Determine how much debt you have.
If you have too much debt in comparison to the amount of money coming into your life every month, most edges will not give you a mortgage because they know you are already over-burdened.
What can you do then? You know much you are owing in debts. So pay down some of your debts so that the ratio of your debt to your income will become very small. The more debts you owe the less your chances of being approved for a mortgage, already with a high credit score. So take steps to save some money. You can cut out some of the ‘non-essentials’ such as eating out and entertainment.
You might think these are small amounts of money but it will surprise you if add all of them up at the end of the month. A high debt-to-income ratio brings down your credit rating considerably. consequently paying down as much of your debts as you can will enhance your credit standing, making you appear as a good risk to mortgage lenders.
3. Have a higher initial down payment than usual.
Generally, down payments are between 5-20% of the total price of the house. When you have bad credit, the lender may require you to pay more than the 20% down payment. It will also average that you finance less of the loan and you may not be required to have a private mortgage insurance policy on the house.
4. How much assets do you have?
People with high amounts of money in their bank accounts and have other liquid assets such investments and bonds are seen as less of a risk to lenders. So although you may have bad credit for at any rate reason, the more assets you have, the higher your chances of being given a mortgage or home loan.
5. Consider other financing options.
With your bad credit, you may want to analyze the opportunity of the Federal Housing Administration, FHA, where people with credit as low as 580 can acquire mortgage loans with complete financing. There are other alternatives such as seller financing and lease with option to buy.
These are all options you can consider to help you get a mortgage. If you do not understand any of these alternatives given in step 5 above, please do speak to your mortgage advisor.