Acquiring a mortgage loan can prove to be big challenge especially if you have bad credit history. Nonetheless, it is still a possible prospect.
In this article, let’s discuss some of your options if you want to get apply for a mortgage loan despite bad credit.
FHA and VA Loans
If applicable, a consumer can seek assistance from the FHA (Federal Housing Administration) or the VA (U.S. Department of Veterans Affairs). FHA insured loans are available to low income Americans who cannot afford to pay the standard down payment required by lenders. On the other hand, the VA loan is a government provision for military veterans.
A borrower who meets the criteria of the FHA or VA can get a mortgage loan despite having a low FICO score. Some lenders may accept credit scores as low as 580 but the minimum qualifying score may vary depending on the lending company.
Piggyback on Someone Else’s Good Credit
You may also consider getting a co-signer. Of course, the ideal co-signer is someone with excellent credit history. It’s also important to understand the risks involved in co-signing a loan, particularly when a large amount of financing is involved. If you fail to keep up with your loan payments, your co-signer will be held accountable to pay the debts. Finding a co-signer who will be willing to take on such a serious responsibility will not be easy. If you are a couple and one of you has good credit, then the one with a favourable rating can apply for mortgage.
Raise Your Credit Score
Is it possible to improve a low credit score? Check your credit report and make sure that no error, unauthorized charges or negative information that should have been omitted long ago is pulling down your score. If you find errors, you can dispute them and request for corrections by sending a letter to the bureau that issued your report. Doing so can instantly improve your score by a number of points.
If you presently have bad credit, then obviously this is not the best to time to be obtaining mortgage. If you can wait out for another six months to a year while you work on improving your credit score, then you will have more opportunities to qualify for mortgage loans with good rates and reasonable repayment terms.