Bad Credit Mortgage: 5 Things You Need to Know
Qualifying For A Mortgage Despite Bad Credit
There’s no reason that bad credit should keep your from owning a home. Here’s what you need to know about getting a bad credit mortgage for you dream home.
It’s thought that a credit score is the end-all, be-all factor that makes a lender’s decision. While this usually holds true, it’s still possible to obtain a mortgage even with bad credit.
There are other considerations that a lender may make, such as overall history or their equity position in the property. Their ruling is based on their own ability to manage risk. If they perceive someone as a high-risk candidate, they’re not likely to help.
Purchasing a home can be a long, drawn-out process but there are ways to make it simpler. Here are 5 things to know about getting a bad credit mortgage.
1. Research, Research, Research
The lucky among us may not have as bad of a credit score as they believe. That’s why it’s good to understand your entire credit situation before ruling out any options.
Use a free software, such as Credit Karma, to review your borrowing history. Also, there are other free programs to help you calculate your mortgage payment.
2. Cash-Out Refinancing
Could cash-out refinancing be an option for you if you already own your property? Many borrowers resort to this to avoid being stuck with a bad credit mortgage.
Credit cards and installment loans come at quite the high cost, especially when considering interest.
By using equity from your home, you could save yourself some serious green. However, this is usually only an option if your credit score is at least 550 or higher.
3. Don’t Rely on Down Payment Assistance
In most cases, the higher the down payment you’re able to make, the better the chances you’ll be accepted for a loan. If you’re unable to make a decent down payment, you could be stuck.
Unfortunately, there aren’t many assistance programs to aid with this. At a minimum, you’d need a score of at least 640 to apply.
4. Credit Unions
Often times, your best bet is to try financing through a credit union. They offer the same services as a regular bank and also some serious perks.
Members actually benefit from the institution’s earnings, in commercialized ways. They receive lower fees and borrowing costs, as well as overall favorable loan terms.
The best choice, if possible, is to work on improving your credit score prior to borrowing. This will help you qualify for better loan terms, especially lower fees and rates.
Having a poor credit history is limiting, but lenders do favor those who show improvement. If you’re able to, sit down with this person and explain your hiccups and why they happened. Also, prove to them that you’ve bettered your situation.
Obtaining a Bad Credit Mortgage
As we mentioned, bad credit history isn’t necessarily a deal breaker. But, the more you can prove to your lender that you’re correcting your situation, the better.
Qualifying for a mortgage loan can also be made easier by doing research beforehand. Our Mortgage Calculator and Quote Generator is here to help you be a more educated consumer.
These services will help you learn about your history before meeting with a lender. Give them a try today and don’t hesitate to contact us with any questions!