Your credit score might mean a lot more than what you give it credit for. Just as a good or a high credit score is going to be checked when you are applying for other financial products, it would be checked as well when you are trying to get a mortgage loan. Having a bad score can be a hindrance that may prevent you from getting the house you have always wanted. That is why mortgage loans even for people with low credit scores can be very valuable.
Mortgage Loans with Bad Credit
While it might be hard, it is possible to get mortgage loans despite having bad credit. It might come at a steep price though. The interest rates that you would get in a case like that would be much higher than usual. This is in exchange for the fact that the lender is giving you the loan, though there is a good chance you might not be able to pay it back judging by your current credit standing.
Steps to Get The Loan
Here are some steps that you can follow in order to get a mortgage loan even though your credit score is very low:
- Get in touch with a lender in your area. It is important that you tell them right away about your situation because withholding that will not do you any good. Find out if they have any option for someone with a credit score as low as yours.
- Work on improving your credit score right away. You should do it even before you start shopping for a home because it might take some time before your credit score gets upgraded to the satisfactory level. If you have a credit card and you are nearing the balance limit, it should be the priority because it would have the greatest impact on your credit. Don’t miss any payments and stay current.
- Make sure that your credit report is accurate. Check all the information there and if you find something that is not right then act right away and dispute it. Provide all the necessary information and paperwork. Keep in mind that it would take some time to have it corrected.
- Be careful with your debt to income ratio. What you owe should not be more than 35% of your income. When you calculate all this, you should use your net income because that is a better gauge of what you can really afford.
- You need to figure out how much down payment you can afford for the house that you are planning to buy. Some lenders will accept 5% of the price of the house but if you have bad credit that kind of deal is not for you. You have to aim for a higher down payment so you can get a lower interest at the same time.
- Try to get a longer term on your mortgage. That would lower down the monthly payments making it more affordable for you.
These are just some of the things that you can do to get mortgage loans for low credit scores.