When your credit is less than stellar, whether due to credit mistakes or simply a lack of credit, you may think that it is impossible for you to ever get a home loan (mortgage) so that you can buy a house. However, just because your credit isn't great, you do not have to rule out the possibility of owning a house in the near future. Get to know some of the steps that you should take when you have bad credit and want to buy a house so that you can be sure that you are able to make your dreams of home-ownership a reality.
Make Sure You Pay Your Rent On Time
Credit scores are a major factor in determining whether or not you will get a home mortgage loan. However, it is not the only factor. One of the ways that you can prove to a bank or other lender for home loans that you will make your mortgage payments on time is to prove that you are a responsible tenant where you are currently living.
This means you should make sure to pay your rent on time consistently. If you can prove to a lender that you have a year (or more) of on-time rent payments, they may be able to override an automatic rejection of your mortgage application based on your credit score. So, keep up on those rent payments to gain yourself a reputation as a model tenant and a record of on-time payments.
Do Not Let One Rejection Stop You
Every lender is different and each one has a different risk threshold for mortgage loans. If you receive a rejection from one mortgage lender, this does not mean that the next will reject you as well.
When you receive the rejection, pay special attention to the reasons that your application was not accepted. Talk to the loan officer you worked with or another official at the financial institution to get as many details as possible so that you can better understand your rejection. If there are issues that can easily be resolved (like a high credit card balance you could pay down a bit), then you can work on them before you move on to the next mortgage lender.
Be Prepared To Explain Your Low Credit Score
If the financial institution you are applying for a mortgage with is willing to manually underwrite mortgage loans (meaning they will not take a computer-generated rejection as the final word), then you may be given the opportunity to discuss your low credit score with them before you get the final word on your mortgage. So, you need to prepare yourself to discuss your low credit score with the loan officer.
Be ready to provide a good explanation of your low credit score. Perhaps it is low because of a period of unemployment several years ago or high medical bills that were difficult to pay off at the time you accumulated them. The better you can explain your credit history and how your situation is different now, the better your changes of succeeding in persuading the lender to give you a home mortgage loan.
Now that you have a better idea of the steps you can take to get a mortgage even with bad credit, you can be sure that you are doing everything you can to become a homeowner sooner rather than later. Click here to learn more about how to get a mortgage in your area.
Share27 June 2016
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