It’s not impossible to get a mortgage with bad credit. While you may run into some additional challenges along the way, that shouldn’t stop you from chasing your dream of buying a new home.
Here are some tips you can use to get a mortgage with bad credit:
1. Shop Around
While some lenders have strict credit score requirements, others are more lenient. If you have bad credit, it’s critical to shop around.
Start by contacting three to five lenders to see what they offer and if you qualify for a mortgage. From there, if you don’t find what you’re looking for, expand your search.
Also, a mortgage broker may be able to help, as they know which lenders are most likely to approve your application.
2. Find a Co-Signer
This is easier said than done for many people, but it’s one of the best ways to get a mortgage.
For example, ask a parent with good credit if they’ll co-sign on your loan. Doing so improves your chance of an approval as this person is responsible for paying the debt if you default.
If you’re heading down this path, it’s important that you seriously consider the implications of missing a payment or defaulting on your loan.
3. Make a Larger Down Payment
The larger your down payment, the less risk your lender takes on. So, if you have poor credit, you should set the goal of putting down as much money as possible.
Not only does this improve the likelihood of an approval, but it also lowers your monthly payment. And if you put a minimum of 20 percent down, you can avoid private mortgage insurance.
4. Review Your Credit Report
Now’s the time to review your credit report to better understand your financial circumstances. This also gives you the opportunity to pinpoint any mistakes that could be dragging down your credit score.
As you’re doing this, make a promise to yourself that you won’t open any new credit card accounts or take on other types of loans. Doing so will only complicate the process.
If all else fails, you can always dedicate your time to improving your credit score as quickly as possible. As your score increases, so does the likelihood of receiving an approval in the future.
You’ll never know if you qualify for a mortgage until you connect with several lenders. You can then go through the pre-qualification process to better understand what comes next for you.
What was your credit score when you applied for a mortgage? Were you able to get a loan with bad credit?