While there can be no doubt having a low credit score makes life difficult for those who need mortgage loans, it is also true that it is not enough to stop a person for securing one. In fact, when it comes to getting a mortgage with bad credit, there is no reason to think that approval cannot be received. But it may take a little effort.
There are several steps that experts will advise an applicant take before actually applying for a mortgage loan. They are all certainly useful, but there is particular need to do two things: firstly, take time to plan your application strategy; and secondly, to ensure that your credit rating is improved.
Thankfully, neither of these measure are particularly difficult, but it does mean that preparation for the application must start at least 3 months before it is lodged. However, getting mortgage approval with bad credit is the prize, and if that is achieved then the effort is very much worth it.
Take Time to Plan
Planning is essential to have any chance of succeeding. This is because there is a raft of individual issues that need to be assessed and dealt with before the application can be considered in order.
The main issues ahead of a mortgage loan application are your credit score, your financial position, and finding for the right deal.
It is important that your credit score is checked and confirmed before progressing. This is because the score will influence the interest rate to be charged, as well as the loan limit. The financial situation relates to the ability to make a down payment. The larger the down payment that lower the loan, and therefore, the more likely mortgage approval is.
Know, Then Improve, Your Rating
Knowing your credit score is essential if your application for a mortgage with bad credit is to develop strongly. Credit agencies will supply a complete credit report – usually for a fee, though, in the long run, this is a worthwhile expense. With this report, the reasons for the low credit score can be explained.
Sometimes the report may be missing facts, like a personal loan recently cleared, but by having the score reviewed, this can be set right and the score increased. There are other things to do to improve your score before applying for a mortgage loan.
Taking out a small personal loan, perhaps a payday loan, and repaying it promptly will improve your score, since a debt will have been cleared in full. Two or three such loans can result in a significant improvement, to vastly improve the chances of mortgage approval with bad credit.
Finding the Best Offer
In truth, there are plenty of lending firms out there willing to grant a mortgage with bad credit, but the problem is the fees and interest rates that they charge. In many cases, the interest is 3 times the normal rate, which translates to hundreds of dollars extra in monthly repayments, and tens of thousands of dollars over the life of the mortgage loan.
Finding the best offer means taking your time to look for a lender offering a fair deal. But getting mortgage approval with bad credit also means higher closing costs, and sometimes the need for Private Mortgage Insurance. Which is another reason why improving your credit rating is a good idea. Then your mortgage can be more manageable.
By Maria Carey