For people who have poor credit history, trying to get a home loan might be a great challenge. Taking into account that a mortgage loan entails a big sum of money, it could be more difficult to persuade a loan officer to approve your application if you have had a record of bankruptcy or bad credit.
Is it possible to get yourself a house loan if you have low credit score? Yes, it is. You will discover financing firms in the market that provide subprime loans. In this post, we will talk about the preparations that you must accomplish to get an approval from a bad credit mortgage lender.
Permanent Employment. Having a low credit score, a prospective loan provider would want some guarantee that you will be able to pay back your mortgage. A home loan involves a lengthier repayment period so you must present proof of a stable job to support your payment obligations on a long term basis.
For anyone who is out of work or is still looking for a job, it will likely be very hard to acquire a mortgage. Then again, if you have just been recently employed with a company, it is advisable to wait until you get past the Probationary Period before applying for a mortgage loan.
Down Payment. To compensate for your low credit score, you should be able to give a substantial amount of down payment. Preferably, you should save for at least 20% to 25% down payment for a bad credit mortgage loan.
Therefore, if you are planning to buy a house that is worth $300,000, you should be ready to hand in no less than $60,000 or more to obtain approval. Furthermore, as $60,000 is really a big investment, it gives a lender assurance that you will be committed to completing your loan payments.
Credit Report. Don’t simply depend on what other people say about your credit history. Take note that there are predatory lenders who may try to exploit your circumstances by declaring that you have a lower credit score than what truly is in your report.
Keep in mind that your actual score could make a big difference with your mortgage rates. You may be offered a higher rate if you do not know where you stand. Just before you decide to get a mortgage loan or any kind of loan, it is recommended that you review your credit file and be aware of your precise credit standing.
Purchase a copy of your report from each of the three major credit reporting agencies. Look for possible glitches or errors. Don’t forget that the tiniest incorrect detail could hurt your final credit score.
Debt-to-Income Ratio. Your credit cards, car loan, personal loan and other financial obligations will be taken into consideration when a lending company reviews your home finance loan application. Many lending firms will demand an average of 40:60 debt-to-income ratio which means your earnings must be at least 20% more than the overall sum of your debts, including your pre-approved mortgage loan.