Buying and owning a home is everyone’s dream. Unfortunately, not everyone has the capacity or the money to buy a home. However, you should not let lack funds come between you and your goal. You can still apply for a loan to facilitate your vision and make it come true sooner than you thought.
What happens when you want to buy a home, but your credit score does not seem to allow you to achieve your ambition? Does this mean that you are out of options and that your dreams are shattered? The answer to that is a big no. You have other choices and loan programs to get you out of this. The big question however is, how do you get approved for a bad credit mortgage? We all know that most lenders do not consider those with adverse credit scores, but that does not mean that you cannot find your way around. To make this easier for you, let’s have a look at a few steps to make that happen.
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Check for credit score errors
The first step before applying for an adverse credit mortgage is to ensure that the credit report is correct and that there are no errors. You could be thinking you have a poor credit score, but the only way to be sure is to confirm. You can confirm by checking your credit cards or request for a free annual credit report. Some of the probable reasons for your poor credit score are due to bankruptcy, slow or late debt payments and changing your job or residence. Carefully check for errors, and if there are, they should be corrected.
What’s your budget?
You cannot apply for a bad credit mortgage if you are not sure of how much you need. Note that poor credit loans come at a higher interest rate and you should, therefore, ensure that you can comfortably pay the mortgage back plus the interests. The mortgage budget should be based on the total cost of the house that you plan on buying but ensure that you can comfortably afford it. The rules recommend that your total payment, including the insurance, fees and taxes, should not be more than 35% of your gross income.
Make a larger deposit
Your credit score determines how much mortgage you can get, and adding a larger deposit can make it easier to get a mortgage even if you have adverse credit. Making a larger deposit, usually somewhere between 15-40%, significantly reduces the risk for the lender, and also, it reduces your total monthly repayments too.
Get pre approved
Do not make the mistake of going shopping for a house before getting pre approved for a bad credit mortgage. By doing this, you have an insight into the kind of home to look for since you will already have an amount to work with.
With these steps, you will get a bad credit mortgage at the best possible rates, and from a lender you can fully trust. You get a chance to make your dream of buying a home come true sooner than you thought possible.