People worry about money more than anything in this day and age, and for good reason. The economy isn’t exactly flourishing, and wages don’t seem to be increasing at a proportional rate to prices. This is why a lot of people keep looking for alternatives to get out of their financial straits. Some invest what little money they have into endeavors like the stock market or real estate, but that is not an option for many others. They take out loans to pay debts, and things get more complicated for them. This leads to a lot of people having bad credit scores, which definitely doesn’t make anything easier. But what if you want to get a mortgage with this bad credit score? Is it possible?
Work on your credit score
Having a bad credit score is certainly problematic, and complicates just about all your financial dealings. But it is not the end of the world, and it can be improved, which is something you will need to do if you want to get a mortgage. You need to show lenders that you are more trustworthy rather than a risk, and that you are working on bettering your financial situation. To do that, you have to start making timely payments, meaning you never miss a deadline of a credit card or utility bill payment. You will also need to educate yourself on the credit rules to increase so you can comply with them all thoroughly, which is something lenders really appreciate.
Consider your options
Improving your credit score aside, it also gets tricky when you start looking for viable lending options. Having a bad credit score doesn’t necessarily mean you are not financially responsible, but this is what most banks think, unfortunately. This is why, in this situation, you might want to consider getting a joint mortgage. This is when someone else signs the mortgage agreement with you –– obviously a person with a better credit score than yours. There are quite a few angles that lenders would consider in this case. For starters, what is the nature of the relationship between you and the cosignatory? In joint mortgages, they would most often be spouses, but it doesn’t have to be.
They would also consider income levels for both signatories and their credit scores; there obviously is a limit for how bad one signatory’s credit can be, but that is up to the lender to determine and it is something you need to inquire about. In any case, the second person signing the mortgage agreement needs to have an excellent credit score.
Try paying a large down payment
It makes a huge difference, and impression, with the lenders when you put a considerable down payment for your mortgage application. Doing so obviously isn’t easy for someone who is already having financial problems, but you need to find a way around it. You can borrow some money from friends or family to pay a considerable down payment. You might also want to consider selling some of your assets or belongings. Just get it done because it will make your application process a lot simpler.
Understand how interest works
Unfortunately, having bad credit significantly affects the interest rates you are going to pay on your mortgage. The lowest rates are for people with excellent credit, because they simply aren’t as much of a risk as someone with bad credit, for banks and lenders at least. In your case, having a bad score means you will pay much higher interest rates due to that higher risk. This is one of the reasons why you need to improve your credit score. When you do so, you will be able to get somewhat lower interest rates, though they will still be higher than the average rates for a person with a good credit report.
Shop around
So, to sum up, is it possible to get a mortgage with bad credit? Yes, it is, but it is complicated. This is why you need to shop around for lenders. Don’t just settle for the first offer and quotation you get, because chances are there is something better out there for you. Interest rates will vary from one lender to the other, so you need to keep looking and get different quotes until you find one that works best for you.
At the end of the day, things are definitely more difficult with a bad credit score, but you can most likely still get a mortgage. It just needs some effort and preparation on your side. It is important that you know where you stand and just how bad your score is so you could work on improving it and going for that mortgage you need.