Home Loans with Bad Credit – There are number of lenders in the mortgage market.
Who are willing to provide you a home loan even if your credit score is lower than 640.
How does Home Loans Work?
When you apply for a home loan to purchase your dream house, lenders check your credit report, verify your income, review your tax returns and bank statements to decide whether you qualify for a home loan.
Requirements of mortgage loans differ among lenders and that makes receiving a home loan possible despite of your bad credit score. But, the interest rate you will pay can be higher than normal. Also, you will be required to make a higher down payment compared to standard mortgage loans.
How To Increase Your Chance For Home Loans with Bad Credit
There are several ways to reduce the risk to the lender and to get mortgage loan you need, despite of your damaged credit report.
- You can make a large down payment. If you do not have enough money to put down a deposit, you may consider applying for a combination mortgage which allows you to borrow two loans at a time for both the down payment and the value of your house.
- Lower your debt-to-income ratio.
- You should earn a high income and have a full-time job.
- You should not have any outstanding debt.
- Should have a large amount of cash reserves and savings.
How To Build Up My Credit Score?
Since you will be charged higher interest rates and will be required to put down a higher deposit due to your damaged credit score, you may want to work on your credit score before applying for a mortgage loan to get the best deals. There are several ways to improve your credit score:
- You can get a credit builder credit card which allows you to build up your credit record as you make on time payments.
- Pay off your current debts and balances on your credit cards.
- Do not miss any payment.
- Avoid credit inquiries.
- Avoid applying for new loans before paying off the previous ones.
- Ask creditors to clean up your collection accounts when you repay them.
- Check your credit report to correct possible errors.