No credit score would automatically prevent you from obtaining a mortgage; nevertheless, the lower your credit score, the more difficult it will be to find a lender willing to underwrite your loan. Lenders think that applicants with bad credit tend to default, which means they mostly fail to pay their money back.
However, each lender assesses loan applications differently, and some may approve loans to customers with poor credit ratings while others would reject them outright. When it comes to your mortgage, bad credit may cost you a lot of money, so it’s especially vital to search around for a decent deal if you can’t do anything to improve your low credit score mortage lenders in Houston before taking out a loan.
Get A Co-signer
If you have terrible credit, a friend or family member with good credit may be willing to co-sign your mortgage. The co-credit signers will help your application, but if you default, the co-signer will be liable for the full loan, not just a portion of it. The co-credit signers will also be harmed if payments are late or missing.
Check with Different Lenders
Traditional banks aren’t the only game in town when it comes to mortgages. Non-bank lenders, internet banks, credit unions, community banks, mortgage bankers, and mortgage brokers are all competing for your business in the sector. Allow them to compete for it and see who offers you the best deal.
Some lenders have more favorable loan conditions than others. By just checking with multiple lenders and locking in a cheaper rate or paying less fees, you may be able to save thousands of dollars.
Control Your Purchases and Improve credit
A new credit account or large purchase might lower your credit score, so avoid taking on or applying for additional debt while applying for a mortgage. Wait until after you’ve closed to take out any new loans.
Credit scores continually fluctuate, it would be better if you improve your credit score before a home purchase. The best way to increase your credit score is to pay down existing debts, make sure you stay current on your bills and avoid opening new lines of credit while you’re applying for a mortgage.
Available Loan Options
Look for programs that are popular with first-time and low-credit buyers, such as FHA mortgages (which need as little as 3.5 percent down payment), VA financing (which requires no down payment), USDA financing (which requires no down payment), and so on.
Down Payment
Even if you own a property, you may be eligible for first-time homebuyer incentives. A “first-time” buyer is often described as someone who has not owned a home in the previous three years. It is possible to have low credit and a sizable savings account. In return for a bigger down payment, lenders are generally prepared to accept a borrower with terrible credit.
Hopefully, these five tips will help you to understand how you can qualify for home loans with bad credit.
