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10 Ways To Qualify For a Mortgage with low credit

Learn 10 ways how to qualify for a home mortgage with low credit.

One of the many challenges you could face when trying to qualify for a good mortgage is low credit. Qualifying for a mortgage typically requires a robust credit score. However, it is still possible to get a low credit mortgage if you know what steps to take. Here are 10 tips to help you understand how to get approved for a mortgage with low credit.

1. Get Your Credit Report

The first step you want to take is to arm yourself with information. If you understand your credit score, you will be more readily able to learn what options may be available to you to get approved for a mortgage.

2. Make Sure You Have a Good Down Payment

When exploring how to get approved for a mortgage with low credit, your best weapon may be your down payment. Since a larger down payment means the lender will be asked to risk less, you could improve your chances of getting approved.

3. Make Sure Your Income is Stable

One of the most important things you can do if you are planning to buy a home and have low credit score is to stay with your current job. Lenders do not like to see people moving from job to job. Unless you are offered a promotion with a pay increase, it is generally better to stay put.

4. Work on Improving Your Credit Score

You may be surprised at how simple it can be to improve your credit score. First, review your credit report and dispute any information that is wrong. Getting errors off your report will help. Next, pay down some of your debt; and make sure you make all of your payments on time. This will give your credit score a minor boost.

5. Explore Various Loan Options

A borrower with low credit may find more success in exploring some different loan options. For example, FHA loans often have less credit restrictions, qualifying for an adjustable rate loan is often easier, and talk to your lender about higher-risk loans that are manually underwritten.

6. Watch Your Rent Payments

If you are making regular rent payments, make sure you track your payments. Being able to show a mortgage lender you have made rental payments on time for a year or more, particularly if they are like what your mortgage payment will be, can help you qualify for a good mortgage.

7. Explain Your Low Credit

Any blemish on your credit report is there for a reason. You may have had a work slowdown in the past and fallen behind. Lenders often will be more flexible if you have a good explanation of the reason for a low score. Illnesses result in high medical bills or student loan payments will often encourage a lender to take a second look.

8. Avoid Pre-Payment Penalties

Talk to your lender if you are approved for a loan with low credit. Make sure there is no prepayment penalty in your loan document. This allows you to do two things; first, you can pay a bit extra towards your mortgage as you have extra funds. Second, you will find it easier to refinance after short period of time, provided you have made all your payments on time.

9. Consider a Co-Signor

Speak with your lending officer and talk about the possibility of adding a co-signor on your loan. This will help boost the overall credit score on the loan, improve debt to income ratios and reduce the amount of risk the lender feels they are undertaking.

10. Consider Waiting Until You Improve Your Credit

Talk to your mortgage lender and ask them what they believe you should do to improve your credit score and make it easier for you to qualify for a home mortgage. This may be frustrating if you have found your ideal home but could mean you have a stronger financial footing when you do buy.

Job loss, illness and steep student debt can mean your credit is less than perfect. This does not automatically mean you will be unable to qualify for a mortgage. Contact Federated Lending in Bucks County, PA and let’s talk about how to qualify for a low credit mortgage loan.

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