Buying a home is one of the expensive investments that people ever make. Purchasing a home typically involves approval of a mortgage loan which can cost thousands of dollars in interest over the life of the loan. If you are suffering from bad credit and want to get a mortgage loan, you have to take in to account several things before submitting a mortgage application. Your mortgage lender will ask you about your credit profile and it might be difficult to convince a lender to approve you for a mortgage loan. However, certain tips may help you secure a bad credit mortgage loan.
#1 Consider FICO Credit System
If you are interested in getting a bad credit mortgage loan, it is advised to take into account the FICO credit scoring system. FICO stands for Fair ISAAC & Company that determines how mortgage lenders will view your creditworthiness. Mortgage lenders usually opt for FICO when they evaluate the loan application of the borrower and can easily know about your credit record with the help of FICO. There will be more chances to get a home mortgage loan if your credit record is high. In case, your FICO score is below 500, there will be chances of rejection of your loan application.
#2 Carefully Review Your Credit Report
Another great tip for obtaining a bad credit mortgage home loan is to thoroughly analyze your credit report for inaccuracies. Because FICO usually approve mortgage loans on the basis of credit report of the borrower. If an error is found in a credit report, immediately send a letter to the reporting bureau requesting an investigation. If the credit bureau determines that an item was incorrectly reported, it will remove the item, which may raise your chances to repair your credit score if it is not in very good condition.
#3 Improve Your Credit Rating
You can improve your credit score by saving money for a down payment on a mortgage. It is recommended to clear the dues of previous loan first. Since, mortgage lenders commonly prefer customers with high credit scores for little or no money down, getting a bad-credit mortgage may require a down payment of up to 20 percent of the purchase price.
#4 Search Online for Mortgage Lenders
Contact mortgage lender that provide bad credit mortgage loans in your area. There are lots of online mortgage lenders that offer loans to people with poor credit profile. However, it is advised to check with the Better Business Bureau before committing to a mortgage loan with an online mortgage lender. It will ensure that the company is trustworthy and treats its customers fairly.
#5 Co-Sign Your Mortgage Loan
Even with a down payment and good income, some traditional mortgage lenders may require a co-signer to guarantee the mortgage. So, credit challenged customers are advised to co-sign their mortgage loan with a person with high credit score preferably 700 or more. Traditional mortgage lenders approve co-signed loans because it gives the lender added protection against losses if you don’t make your payments.
To conclude, following the above mentioned guidelines will help you qualify for a bad credit mortgage loan.