Tips For Getting a Mortgage Loan With Bad Credit

If you are looking to buy a home soon, you might be in need of a mortgage loan. Financing is common when buying a home, but if you have less than perfect credit, it can be a lot harder. If you don't have the best credit, follow these tips for improving your chances for being approved.

Explain Why You Have a Low Credit Score

The first thing you should do any time you are going to apply for financing is get a copy of your credit report and take a look at your credit rating. This lets you know where you stand, and also lets you explain the situation to potential lenders. You should go into the finance institution when applying so you are there to explain your credit score and report to them. In some cases, this is enough to let them look beyond it and consider your income and other qualifications for the mortgage loan. For example, if all the debt is older and paid off, the score might just not have updated yet. This is definitely something to tell them as it shows you are trying and that your current bills are being paid.

Offer a Substantial Down Payment

Nearly everyone applying for a mortgage loan will need to provide a down payment, but the amount is often dependent on your credit score. With a lower credit score, you need to offer up a higher down payment. One of the main issues with having a low credit score is that it shows you might not have enough money to pay all of your bills and debt on time. By offering a higher down payment, you can let them know you have more than enough to pay the loan on time, and are proving that with double or even triple the normal down payment for home financing

Get a Co-Signer For the Loan

In some cases, you don't have much choice but to get a co-signer. This lets the bank know that if you can't keep up with your payments, the co-signer will then pay the mortgage. This isn't ideal, but if you want to get home financing, you should definitely consider it. Make sure you look for someone trustworthy and who has excellent credit. They won't accept a co-signer with a similar credit rating to your own. The co-signer first needs to be approved before your mortgage loan can be approved, so start looking for someone soon after you decide you need a co-signer for the loan.

Request an Adjustable Rate Mortgage

If you are approved for a mortgage loan with these other tips, don't forget to ask for an adjustable rate. This isn't always available, but when it is, it really comes in handy for people with low credit. When you have low credit, your interest rate is typically higher, which costs you more in the long run for your home. With an adjustable rate, you can improve your credit, then apply for refinancing down the line and hopefully have that interest rate adjusted.

Share