How can you obtain a mortgage with poor credit? Do you think your bad credit is keeping you from purchasing a house or condo? Think again. Loans are available for individuals with little, no, or poor credit. Did you buy a property in the past and something bad occurred to cause you default on the mortgage? Think you will never own another home? Not necessarily true. There are several options available for those with por credit.
If you already have bad credit you may be at a disadvantage obtaining a loan. Many predatory lenders are seeking those with bad credit to take advantage of them, so you need to know the fundamentals of a sub-prime mortgage.
You need to first check your current credit ratings. New laws have gone into effect in 2005 that mandate credit reporting companies to provide 1 complimentary credit report to consumers each year. There could be errors or omissions on your report which are decreasing your credit score.
You can improve your score by closing out credit accounts you opened but never use. Lenders look for the number of accounts you have open, the time they have been open, any past due notices, and how much you owe. It may be a wise idea to pay off small debts that appear on your credit report.
If you have poor credit then you likely have little in savings for a down payment for your dream home. Mortgage lenders frequently offer lower down payments with FHA loans, and first time buyer mortgages. The disadvantage is that you will likely pay a higher interest rate since you donít have as much cash to put down. You may also have to pay private mortgage insurance (PMI) which insurers the lender in the event of foreclosure.
The greater your down payment, the more this helps your interest rate and the type of mortgage you can afford. Remember there is a broad spectrum of mortgages available with anywhere from 30, 15, and 40 year terms. There are also adjustable rate mortgages (ARMs) and fixed rate loans, so remember to discuss these options with your mortgage lender or broker. Study your options carefully so predatory lenders donít take advantage of you.
Protecting your credit is crucial so you can look forward to improved credit and eventually better rates and terms. Ensure that any loans you currently have are in good standing. By demonstrating that you are on the right track, your mortgage is more likely to be approved. Mortgage companies want to provide mortgages, not foreclose on homes.
You may stand a better chance of approval if you have a large mortgage down payment. Even several thousand dollars will give the lender an indication that you are serious.
Take some time to learn about your credit report and your credit score, and try to pay off your old debts if at all possible. Then invest even more time finding the best rates and terms for your mortgage. By folding these elements together, you can find the best deal possible and save thousands of dollars.