Everyone needs a place to live. People want spaces that offer a wide variety of advantages including a fast commute to work, local amenities like parks and updated kitchens and baths. For many people, the answer to where to live is in a home of one’s own. Buying a home has many financial and emotional advantages. Unlike renters, homeowners build equity, don’t have to worry the landlord wants the space for others and can make any and all changes to it with ease. While many people become homeowners, most people will need a mortgage to buy a home. If you have less than ideal credit, this can be hard. However, there are ways to apply for and get a mortgage even if your credit rating is less than stellar.
Knowing Your Credit
The first thing to do is know your credit score. You might think your score is not high but perhaps that was a long time ago and it has improved now. It’s important to know what credit scores mean. In general, most credit reporting agencies offer scores in terms of a number. A score might range from as low as three hundred to eight hundred and up. Scores are typically ranked from very poor to excellent. Scores below five hundred are usually considered very poor. A mid range score is roughly in the six hundreds. Good credit scores are those in the seven hundreds while very good and above are scores that are about the mid seven hundreds and higher.
Everyone should find out their credit score before they begin to apply for a mortgage. By law, everyone is entitled to a free credit score once every twelve months. If you haven’t gotten hold of your credit report before, now before you get that mortgage application out is the best thing to do. Sometimes, you might see errors. There might be a bill you’ve paid that is counted as unpaid. Your name might have been confused with someone else with a similar name and worse credit. If you’ve been in a previous relationship, your spouse might have issues that linger on your personal credit rating. You have the legal right to dispute any issues with your credit. Reporting agencies have a legal obligation to correct any information that is not accurate. Make sure you have any inaccuracies documented in detail. Reporting companies must make all necessary corrections.
Improving Your Credit Score
If you are going to apply for a mortgage, even a small difference in credit scores can make a huge difference. Bringing up your credit score by as little as fifty points can lead to a better rate and reduced overall costs. There are simple things you can do to bring them up. One of the easiest is letting time pass. If you don’t need to apply for a mortgage right now, you might decide to wait a few months. In the meantime, you can get your bills in better order. Look for ways to reduce your bills like not eating out and walking to work. Use the extra funds you’ve saved to pay down that debt. Making a few basic changes can indicate to credit reporting agencies that you are acting responsibly and have a firm grip on all aspects of your finances.
FHA and VA loans
Unlike standard lenders, government officials are happier to lend money to those with imperfect credit. You’ll find relaxed requirements that can make it easier to qualify for the home you and the house you like best. Government officials will also let you borrow more money with a reduced down payment. These loans are ideal for people who are looking to buy other forms of housing. Those who want to purchase a mobile home can get access to such funds that traditional lenders might not allow. Vets also qualify for loans at a lower cost even if they don’t have perfect credit.
A Larger Down Payment
Lenders like it when people can come with more funds for a down payment. Look around your house. See what you’re not using and can sell to bring in cash. Holding a garage sale and putting things on popular online selling sites can also bring in more money to put into a house. if you don’t wear that necklace, now is the time sell it for something you’ll use a lot more. Ask your relatives. Your parents might be happy to add to your funds for a down payment on the house you want best, especially if you’re looking to buy a home near them so they can see their grandchildren more often. Think about other ways to increase your available cash.
You might want to take on another part time job on weekends and during your spare time. Working hard for a few months can build up a nice nest egg that you can use for your new home. Lenders may not count poor credit scores as much if they are offset by a much larger than expected down payment. Consider taping into your savings and using them more effectively. Money left in a low interest savings account is not going to improve your life as much as a better place to live.
Community Banks and Credit Unions
Standard lenders can be very wary of many clients, especially those who have poor credit. Now is the time to take a close look at local options. A small bank may be more flexible if they know you and you have an account there already. They’ll be more likely to work with you directly. Credit unions are another possibility. Credit unions exist to serve the needs of members. They’re not there to earn a profit for shareholders. In many cases, they will offer those looking for a mortgage more favorable terms on a mortgage than traditional sources of funding. These two sources are an excellent way to get a mortgage on the best possible terms.
