The good news is that while it isn’t easy, you can be approved for a home loan with bad credit. Bad credit mortgages exist for those that are not able to be approved for a conventional loan.
That being said, you may not have an entirely easy road ahead of you to qualify, as other factors often need to be considered before you are approved.
However, those who are motivated to buy a home soon can take out a bad credit mortgage and purchase a home. The following tips can help you get into a better position to qualify, even with poor credit now.
Check Out a Bad Credit Mortgage Product: FHA Loans
In order to make homeownership more accessible and get you into a home sooner rather than later, investigate an FHA loan or sub-prime loan.
This is only one of the bad credit mortgage products available. This loan can help those with credit scores as low as 500 get the financing they need to own their first home.
Be Ready to Show Additional Information
A lender will look at compensating factors when deciding whether to approve you for a loan.
Situations may have changed and the financial hardship that caused an issue in making timely payments on bills may have passed. Look like a better candidate and take steps to re-establish your credit, such as:
- Paying down outstanding balances.
- Making regular payments.
- Getting a secured credit card.
Be patient with lenders and provide any supporting documentation required as bad credit mortgages have to go through manual underwriting. Some additional factors that can help you get approved are:
- A down payment of 10 percent or more.
- High income.
- No outstanding debt.
- Significant cash reserves.
- A long period working with your current employer.
- A low debt-to-income ratio (DTI).
All of this is considered when applying for an FHA loan or other bad credit mortgage.
Put Together a Down Payment
Depending on the type of loan, you may have a few options to finance your down payment and pay less over the life of a loan. Do consider that those who may put zero down may have to pay mortgage insurance on their loan.
Individuals who can use help in making a larger down payment may want to look into using gift funds from a family member or friend or applying for a Federal Grant or down-payment assistance.
It may pay off to investigate all of the resources available to reduce the loan amount requested from your lender and establish initial equity in a home.
Get the Financing You Need
Bad credit mortgages, such as FHA loans, VA home loans and USDA home loans, all have their own set of requirements, but many find terms to be less stringent than those for a conventional loan. You can qualify for a loan without excellent credit! Speak with an experienced associate at Mortgage Investors Group to learn more about bad credit mortgages today.