Top 7 Bad Credit Mortgage Methods, Techniques and Tips
These days getting loan to buy a home is very common.
Many people are doing this to purchase the house of their dream but for people who have bad or low credit this dream is still a dream as it is really difficult to get a mortgage at bad credit.
Many people do not even try to apply for the mortgage because of their bad credit. They do this because they are not aware of the fact that it is difficult but at the same time not impossible.
Anyone can get a bad credit mortgage, if he put some efforts. People all over the world are getting mortgage with low credit. You can also do it by following some simple tips and methods described below.
Get Your Credit Report and Examine it Carefully:
The first thing you should do to get bad credit mortgage is to obtain your credit report from the sources available in your region and then examine it carefully. Your credit report must be accurate and consistent. If you find anything wrong or miscalculated, report it to your relevant credit company and get it corrected immediately. As all the documents you will be needed for getting mortgage must be precise and without any error. In order to prove your point, you can provide related documents to the credit company or anything they ask for. Don’t hesitate for getting your report corrected as your credit report must be accurate to persuade lenders to consider you.
Get a Co-signer:
One of the best ways to convince lenders to provide you bad credit mortgage is to get a co-signer. A co-signer can be anyone close to you like your parent, your best friend, sibling or anyone who can risk his money for you. Keep this in mind that the co-signer you are selecting must have good bank credit report as well as good income so that he can convince lenders to give you mortgage. The co-signer should be informed about the consequences of signing this loan form. He and you, both will be equally influenced by the credits and taxes related to this loan.
Get rid of All The Debts Before Applying For Loan:
When you apply for a loan, they will definitely check your debts and if they found high debt to income ratio, they will probably reject your application and will not provide you mortgage. So it is better to prepare yourself properly before trying to get loan. Pay all your credit card debts and all other debts that are on you. If your credit report shows low credit but zero debt, lender will likely consider you as it give him the impression that you pay all of your debts on time and will pay his debt too.
Make Good Down Payment:
When you purchase a property, you have to make a down payment which could be 5 to 25% of the total price of the property. Try to make as high down payment as you can. It will reduce your loan amount and convince lender that you are serious about your investment and will certainly pay your loan on time. This will increase your chances of getting mortgage at bad credit.
Length and Reasons Of Low Credit:
Many lenders need to know the period of your bankruptcy and reasons of low credits. They decide which type of loan you could get according to your provided information regarding length and reasons of low credits. Most of the lenders grant mortgage if the bankruptcy is 2 years long and has been recovered, you must provide them proof of your credit restoration. Some lenders can also provide you mortgage on recent bankruptcy so it is better to ask them directly instead of assuming.
You should also mention the reasons of your bad credit while applying for mortgage. The reason should be something involuntary, like a disease, accident etc. that can show that you are not irresponsible person. If the reasons of your low credit are debts, wrong investments, or poor money management, lenders will certainly not accept your application as they can see a high risk of not getting their money back.
Prefer Mortgage Programs Offered By Government:
Government provides flexibility in mortgage programs to the bad credit people. They do not have strict guidelines as offered by other private firms. You can get advantage of one of these government programs like FHA (Federal Housing Administration) loan. They provide mortgage to people with bad credit and financial conditions and they do not require high down payment for purchasing a house. If you cannot pay high down payment you are allowed to pay just 3.5 % of the total price of property which is much lesser than required by other companies i.e. 20%. They also allow you to deposit this money by borrowing from anyone which is not allowed by other private companies. Read: How To Keep Your Insurance When Relocating
Show That You Are Earning Stable Income:
It is very important for money lenders to find out about your income in order to make sure that you can pay their money back on time. So, it is essential that you have a permanent job with stable income that is quite enough to cover your expenses and pay your mortgage. You should take some time to get a position of permanent employ with sound salary before applying for your bad credit mortgage. This will increase your chances of getting mortgage and will also help you in paying high interests accompanied with the mortgage. You can select adjustable rate mortgage to prevent high interest due to your bad credit as it will allow you to keep your interest manageable.
These simple and effective methods described above can greatly help anyone who wishes to get a mortgage but have low credit. Do not let your bad credit becoming an obstacle between you and your dream house, just read these tips carefully and apply them to make your dream a reality.