Many families are finding it harder to get approved for a mortgage after taking hits from the economic recession. If you have bad credit, don????????t give up. You may still qualify for a mortgage loan after all. Here are some ways to get accepted for a mortgage with bad credit.
Boost your credit
You can take hits on your credit by declaring bankruptcy, missing payments, foreclosure, late payments or simply borrowing more than you can pay back.
If you find that your credit has taken a huge hit, try boosting those three numbers back up. Make all of your payments on time and avoid opening any new lines of credit. Hold a job down for at least one to two years and build up your savings if possible. Draw out a budget plan and don????????t overspend. If you do all of these, you will see your credit score start to climb back to an acceptable number.
Wait until you have a down payment
Most lenders will look at your more favorably if you have a down payment set aside. Because of this, someone with bad credit with a down payment may be accepted as easily as someone with good credit but no down payment.
Though having a down payment will help your case, some lenders will still refuse you if your credit is below 580. Keep that in mind as you apply for a loan.
Check out the Federal Housing Administration (FHA)
If boosting your credit is out of the cards right now, check out the FHA. The sole purpose of the FHA is to promote homeownership and make it easier for families with bad credit histories to qualify for home mortgage loans.
If you have bad credit, lenders will refuse you. However, if you get a FHA loan, lenders may be much more willing to approve you. This is due to the fact that the FHA will cover your debt if you fail to make payments.
A FHA loan is also good for people with bad credit as your interest rates will be lower. Conventional lenders will approve you at a higher interest rate because you are an at-risk borrower with bad credit. A FHA loan will cut that interest down and will also allow you to get a mortgage loan with little to no down payment.
Though the FHA is great for someone with bad credit, be aware that you usually won????????t get approved for anything over $150K. Also, a FHA loan will require you to carry a higher, more expensive mortgage insurance premium.
Ideally, everyone in the world would have great credit and getting approved for a mortgage would be no problem. Unfortunately, getting approved for a loan can be next to impossible if you have bad credit. However, don????????t give up. Look for all available resources and talk to a lender to see if there are any special programs that can help you out.