Impress a mortgage lender…even with bad credit
January 29, 2013
Author: Allison K.Watkins
Suppose, you found a home you loved and wanted to get a mortgage loan immediately. But, the problem is that you have bad credit and most of the lenders are not showing an interest in lending you the required mortgage.
Now the question is, how do you qualify for the loan? Can you impress a mortgage lender with bad credit? It is a possibility…
In order to help you out, I am going to share a few steps, which can help you impress your mortgage lender, and also get you a qualified mortgage loan with bad credit.
- Shop accordingly to your credit scores
The credit score is the most important factor that can qualify or disqualify you for a loan. It’s hard to pick an agent that can qualify you for a loan with bad credit; however, if you had to educate yourself with the current market trends, you could find someone easily, and according to your credit score.
To make it more simple, let me give you an idea how and where to shop according to your credit score. Nowadays, to get qualified for a mortgage, you need an average credit score ranging in between 700-720. If you have a credit score less than 700, you should mentally prepare yourself for higher rates. If you have a credit score less than 600, than you should not waste your time by visiting local lenders because, most of the lenders have set 600 as their cutoff point.
Now the question is who will give you loan on a bad credit score? The answer to your question is the Federal Housing Administration (FHA). FHA qualifies people who have a credit score of 580 or even less by just increasing the down payment amount.
- Prove yourself as consistent worker:
Nowadays, the lender just does not want your high flying credit scores. Lenders are now more conscious about their money and want to do some proof reading before qualifying you for a loan. So in order to impress your mortgage lender, you have to show that you have been working at one place for the last two years and you have a steady income, even though, it is not a large income.
- Total Debt to Income Ratio:
It might sound like something that was used to issue a loan in ancient times but, let me tell you that this old technique is in business again. However, there is more leeway to the debt to income ratio now. The standard ratio is 36 percent. However, you may now qualify with a debt more than the standard ratio but, you have to pay a higher interest rate for it.
The interest rate could be lowered when you ask the lender to help you or if you shop well, you can find a lender who can give you the average mortgage rates, even though, you do not meet the total debt to ratio requirement.
- Show them the money:
It is now time for you to put some money in front of your lender; it will show your potency to the lender. Try to make as large a payment as you can make and try to make it almost if not than 20 percent of the total amount that you are going to owe.
If you are able to make a down payment of 20 percent, your mortgage lender will drop your interest rate. Along with that, you won’t have to buy private insurance which means, you can save money in long run.
- Know the real value of the house:
You have done the major part of your loan shopping; now you have to be very careful of the value of the house you are interested in buying. Be calm, ask your real estate agent to help you in finding the right value of that particular house. Along with that, go online and search the market and find out what’s the value of the home in that specific area in which you are looking for house to buy.
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