How to Get a Mortgage Loan with Bad Credit
It is possible to get a mortgage loan with bad credit . There are many lenders who offer subprime mortgages to borrowers with less than perfect credit. You can improve your chances of getting approved for a mortgage loan by following these tips.
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Check your credit report
Before you begin the process of shopping for a mortgage, you’ll need to pull your credit report and check your credit score. This will give you an idea of where you stand in the eyes of lenders and whether or not you’ll need to take steps to improve your credit before applying for a loan.
If you have bad credit, there are still options for getting a mortgage loan. However, you will likely have to make some trade-offs, such as paying a higher interest rate or making a larger down payment.
Even if you have bad credit, it’s still possible to get a mortgage loan. However, you will likely have to make some trade-offs, such as paying a higher interest rate or making a larger down payment.
If your credit is severely damaged, you may not be able to get approved for a conventional mortgage loan at all. In that case, you may need to look into other options, such as getting a subprime loan or finding a cosigner.
Find a cosigner
If you have bad credit, one of the best ways to get approved for a mortgage loan is to find a cosigner with good credit. A cosigner is someone who agrees to be responsible for the loan if you default on it. This means that if you don’t make your payments, the cosigner will be required to do so.
The benefit of having a cosigner is that their good credit will help offset your bad credit and improve your chances of getting approved for a mortgage loan. Keep in mind that the cosigner will be equally responsible for the loan, so it’s important to choose someone who is reliable and who you trust to make payments on time.
Get a government-backed loan
Government-backed loans are available through the Federal Housing Administration (FHA) and the Veterans Administration (VA). FHA loans are available to all borrowers, with a minimum down payment of 3.5%. Borrowers with credit scores as low as 500 can qualify for an FHA loan. VA loans are available to eligible veterans, reservists, and active-duty service members and their surviving spouses. These loans do not require a down payment or private mortgage insurance (PMI).
Look into special programs for bad-credit borrowers
Some conventional lenders offer special loan programs for borrowers with bad credit. For example, the Federal Housing Administration (FHA) insures mortgage loans made by approved lenders to people with less-than-perfect credit.
If you have a bankruptcy or foreclosure in your recent past, you might still qualify for an FHA loan. In general, to get an FHA loan, you’ll need a minimum credit score of 580, although in some cases you may be able to get approved with a score as low as 500 if you can make a larger down payment. The size of your down payment also affects your eligibility; if you can put down 10% or more of the purchase price, you may be able to qualify even if your credit score is as low as 500.
Consider a portfolio loan
A portfolio loan is a type of mortgage that is not sold on the secondary market and therefore doesn’t have to adhere to certain guidelines set by organizations like Fannie Mae and Freddie Mac. Because of this, portfolio loans are sometimes available to borrowers with bad credit.
To get a portfolio loan, you’ll need to find a community bank or credit union that offers them. Be prepared to provide the lender with a detailed account of your financial history, as well as an explanation of why your credit score is low. The lender will also likely require a larger down payment than they would for a conventional loan.