Getting a mortgage with bad credit can be a daunting task, but it is not impossible. With careful planning and a little bit of effort you can get a mortgage even if you’ve had financial troubles in the past.
Here are a few tips on how to get a mortgage with bad credit:
1. Check your credit score
Before you start looking for a mortgage, it is important to check your credit score. You can request a free credit report from the credit bureaus and review your credit score. If your credit score is below 620, it is considered bad credit. However, there are lenders who will approve a mortgage loan with a lower credit score.
2. Save for a down payment
A down payment is a requirement for most mortgage loans. If you have bad credit, having a larger down payment can improve your chances of getting approved. Saving for a down payment may also show lenders that you are responsible with your finances.
3. Shop around for lenders
Don’t settle for just one lender, shop around and compare rates and terms from different lenders. Different lenders have different lending criteria and interest rates. A mortgage broker can help you compare different lenders and find the best terms for you.
4. Consider government programs
There are government programs that offer mortgage assistance to borrowers with bad credit. The Federal Housing Administration (FHA) and Veteran’s Affairs (VA) offer mortgage loans to borrowers with lower credit scores.
5. Improve your credit score
Even if your credit score is bad, there are steps you can take to improve it. Paying down outstanding debts, making on-time payments, and disputing errors on your credit report can all help improve your credit score. The higher your credit score is, the better terms you will get on your mortgage.
6. Get a co-signer
If you have a family member or friend with good credit, you may be able to get them to co-sign on your mortgage. A co-signer can help you get approved for a mortgage loan, and may even help you get better terms.
7. Be prepared for higher interest rates
Lenders may charge higher interest rates for borrowers with bad credit. This is because they see these borrowers as a higher risk. Be prepared to pay a higher interest rate on your mortgage, and be sure to factor this into your budget.
In conclusion, getting a mortgage with bad credit is not impossible. By following these tips you can increase your chances of getting approved for a mortgage loan. Remember to shop around for different lenders, improve your credit score, and be prepared for higher interest rates.