Perhaps you have made some financial mistakes or fallen on hard times financially. If you are lucky, you should have learned from the mistakes and you are seeking a better financial footing. Even so, it can take some time to make sound financial decisions and you should reflect on the reasons why you dipped financially and how you can overcome poor financial status.
When getting any type of mortgage, you should consider your financial position and if you have poor credit history, this should not affect your ambition to get a house. If you have been turned down by a bank, you may not have realized that it is quite easy to get a loan from other vendors.
We have many lenders in our network and we will link you up to get a mortgage loan to finance your loan. Getting a mortgage with a less than stellar credit history can be quite a challenge. However, with the right links, you will have your loan within no time. Here are some of the factors that you should consider.
Get Federal Housing Administration approval
Conventional home mortgages are not available for homebuyers with low credit scores because they are viewed as risky by lenders. However, the federal housing administration can be a good resource for new homeowners with low credit scores.
The FHA does not offer credit facilities. It acts as insurance or guarantee to your lender in case you default on the mortgage. Many lenders will consider it as a low risk and it improves your odds of your loan approval.
Fill out loan request form
We will connect you to many lenders in our network. The lenders understand the problems that many people go through. Hence, they will be able to finance your loan request if you meet their criteria.
You have to do thorough research to find the best lender because home loans take time to repay. You should also get in touch with a mortgage broker licensed in your state.
Make it temporary
Obtaining a mortgage if you have poor credit score can be expensive if you do not have a plan to overcome your financial challenges. You should use it in the short term as you get a long-term plan to overcome it. It is important that you plan to repay your mortgage and your other bills on time.
If you are looking for a good long-term deal, finding the right lender is essential. A loan with a fixed interest is better because you will know the amount of monthly cash that you are repaying instead of a variable interest rate. This keeps your debt low and manageable.
Understanding the principles of different loans is vital in finding the right loan for yourself. You can use consumer handbooks and other materials to help you.
Do not go for prepayment penalty
The most crucial aspect is that there are lenders who will convince borrowers to go with a loan with a prepayment penalty. This is a vital clause because it allows the lender to collect extra money if you manage to clear your debt earlier than stipulated.
Paying off a loan early does not have to include extra cost, it should actually help you overcome the debt easily. Find a lender who will understand your financial position and help you in the process.
Improve your low credit score
If you have a poor credit score, the most crucial aspect in improving your score is to get a better deal on home loans. You can improve your credit score by repaying your loans on time.
Even a slight increase in your score can make a significant difference in the interest rate that you are repaying.
You should look for a lender who will give you competitive interest rates that will not jeopardize your monthly financial obligations. You should come up with a solid financial solution for the future to avoid any difficulty that could arise in future.
Make a high downpayment
The most crucial aspect of getting a home loan is to ensure that you make a high down payment. By making a high down payment, this will help you towards securing a good mortgage deal. Lenders need some assurance that they can get their money back and by making a high downpayment, you will be in a position to deal with the rest of the loan. The more equity there is in the house that you have bought, the easier it is to repay the loan.
Avoid lenders mortgage insurance
When you request for the home loan, there are two approvals that you need – lenders’ approval and mortgage insurer approval.
There are three things that you should understand if you are looking for a loan with low credit score. These include:
- Lenders are becoming less strict with credit scores
- Some lenders can identify irresponsible applicants and the unemployed
- Proving for one year of on-time rent payments can be crucial
According to The New York Times, as a borrower with low credit score, you should invest more in overcoming financial challenges that have driven you to such a position. This way, you will be able to evaluate your choices and build a better financial score.
How to improve the odds of mortgage loan approval
If you want to improve the chances of approval and you can verify that you have paid your rent for the past twelve months on time, then you will increase your chance of getting the loan. Another technique to offset the impact of poor credit is to increase the downpayment.
This works because your lender will see you as a serious and committed person who is willing to repay the loan within the stipulated time.
Explain the low credit score
Borrowers with a less than stellar credit history are required to overcome the score by explaining it to your lender and reasons why you are in such a situation.
Some of the common issues that contribute to a lower score but lenders view as less risky include student loans or medical bills.
Understanding why you have bad credit
When shopping for a mortgage, it is imperative that you consider the big picture. You need to know what caused your financial problems, once you know the underlying reasons, then you will be in a position to build a better financial future.
In such situations, you can take time to rebuild your credit history by slowly merging your loans or cutting down on unnecessary spending.
Formulate a bad credit home loan plan
Bad credit usually costs more than traditional home loans. Therefore, it is essential that you formulate a plan that will help you clear the debt within a manageable period. Lenders tend to compensate for the bad credit by charging more and you are expected to pay higher rates than traditional lending.
Best home loan
However, lenders in our network will evaluate your loan request and you can be in a position to make the right call on the best loan to take. It is better to take the loan right now instead of waiting to take it in future. The money you have right now is more valuable than money acquired in future. Therefore, you should reconsider checking out loans from a network of lenders within our network.