Top 2 Secrets to Securing Home Loans for Bad Credit
A bad credit score is one of the prime factors that can prevent you from getting a home loan and making your dream of having your own house a reality. Purchasing a house with poor or limited credit has never been simple, and many people may wonder if they are able to become a homeowner. If you are also in the same boat then stop worrying, as there is still hope for you. Even if your current credit score is poor, such as below the 600s or worse, then also you may not be barred from purchasing a home at all.
It is because there are other factors that are as important as your credit score, and by focusing on these, you can get house loans for bad credit. As long as you can let the lender understand that you can afford the home loan and are financially stable, all are not lost. In order to enhance your chances of buying a house with bad credit, you can try some secrets. Here are these:
Know what stress to the lender most
Nowadays, lenders generally use automated underwriting to do their loans. However, if your credit score is low, you may need to have a human being work on your loan from the beginning. It is fine; manual underwriting can work in case your credit score is low; all that you have to do is to show the underwriter that your low credit is not the main factor of your file. In most of the cases, a bad credit home loan can be approved if you can show the trend of good payments over a noticeable period. Moreover, you need to gain the trust of the underwriter and to do so, try to emphasize the good in your application before submitting the pile of paperwork required for a home loan with bad credit. The most important thing that you need to keep in mind is that a bad credit score alone cannot sink your application to buy a home. However, when it is coupled with lots of missed payments, high debt, as well as no savings, will most likely prevent you from buying a house. So, focus on other aspects of the loan that you can fulfill and thus, impress the lender to approve your loan application.
Consider an owner financed deal
The owner financed loans are one of the best secrets for people who want to get a home loan with bad credit. With this, a private lender will work with you. In most of the cases, the private lender is a landlord who wants to buy his own property but has not been able to get the price that he wants. In this situation, you may be able to get the landlord to write you a mortgage; it is called owner financing. It works just like a regular mortgage and will help you to fulfill your dream. You can set up a 15-year to a 30-year mortgage if you like. Due to the risk for the lender, you may need to pay well above the market interest rates. However, the good news is that if you pay the loan on time, you may be able to refinance out of the seller-financed note and get a regular mortgage in two or three years.
Qualifying for a home loan with bad credit is possible, but you will need to compare the mortgage terms carefully before applying for it. Before you take on a home loan with bad credit, it would be better to first work toward improving your credit score. A better credit score will help you to qualify for a better loan, with a lower interest rate and more manageable loan terms.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.