Attaining home ownership can be difficult if you have damaged or bad credit. There are a few things you can do that will make you a stronger candidate for a loan from a mortgage broker. Below are six steps you can take beginning right now.
1. Pay Bills Timely
Anyone can experience a period in life in which bills get behind and it can hit your credit score hard. One way to start making a comeback is to simply pay all of your bills on time each month. That seems easier said than done at times. Try and stick with a realistic budget and trim down on expenses where you can. You can find a happy medium that allows you to pay your bills comfortably.
2. Find a Co-Signer
Having bad credit is not the end of the world in seeking a mortgage if you have someone that can act in the capacity of a co-signer. Another individual with good credit can help you get reestablished quickly. Make sure you are able to carry through with the loan requirements. The co-signer will share an equal responsibility in the mortgage if it remains unpaid.
3. Establish Good Banking Behavior
Establishing a good banking history will demonstrate that you are responsible with funds. Maintaining a healthy balance and not allowing overdrafts to happen are critical. The longer your good history exists with one bank, the better.
4. Keep Credit Debt Low
High credit card debt will make you a high-risk for anyone to offer a mortgage loan. Keeping your credit debt low will provide a higher expendable monthly income and show financial soundness to the right lenders.
5. Consider an Adjustable Rate Mortgage to Start
An adjustable-rate mortgage or ARM may be one of the few options you are given in securing a mortgage with bad credit. The rates tend to be higher and can dramatically fluctuate. This might be a good choice to get mortgage financing but plan on trying to switch to a fixed rate as soon as possible. You can do this by maintaining an excellent payment history for a few months.
6. Save a Large Down Payment
The more you can show a potential lender in being financially invested in the real estate purchase, the better the odds are that you will get an approval. Saving as much as 20 percent towards the down payment can be more helpful than you know. The lender will feel that you are willing to take a bigger risk, which can lead to a better follow-through on commitments.
Finding the right high risk mortgage lenders or bad credit mortgage refinance source combined with sound financial practices will result in the right loan for you.