Can You Get A Mortgage With Bad Credit Record?
As an after effect of the economic recession, lenders have stopped offering bad credit mortgage loans to the borrowers. This is because bad credit home loans or subprime mortgages were one of primary reasons for the credit crunch in the recent past (2007-2009). Check out this article to find out how to get bad credit home loans.
Criteria to get mortgage with bad credit
You have a chance to get a mortgage with bad credit if you satisfy the following factors.
- Debt to income ratio – You need to have a debt to income ratio 28/36 or low. This numbers represent your front end ratio and back end ratio respectively. The former signifies the percent of your income utilized for monthly housing costs and the latter signifies what percent of your income goes towards your recurring debts.
- Down payment – Lenders usually require comparatively high down payment in order to offer loan to a person with bad credit record. Therefore, if you’re looking for a bad credit mortgage, then accumulate enough cash for the down payment before applying for a home loan.
FHA mortgage for borrowers with bad credit
FHA (Federal Housing Authority) is a governmental agency under HUD (The Housing and Urban Development Agency). FHA does not offer any home loans; actually, it guarantees certain home loans against loan default. Though you can get FHA home loans with bad credit record, yet you need to have a minimum of 620 credit score in order to qualify for such loans.
Go through the lines to find out what other factors to satisfy in order to qualify for FHA home loans.
- * You should have a valid Social Security Number so as to prove that you’re a valid citizen of USA.
- * You need to be more than 18 years of age.
- * You will have to make at least 3.5% down payment on your home.
- * You need to earn a stable income along with a good employment history.
- * Your debt to income ratio should not be more than 29/41.
Lenders will also check your credit history before offering you an FHA insured mortgage loan.
Taking out home loans from credit unions
You can also take out mortgage loans from credit unions. However, you need to be a member of a credit union in order to take the advantage. Several credit unions offer Home Loan Payment Relief (HLPR) Loan. These loans are usually offered at comparatively low interest rates than the market index.
How to repair your bad credit record
It is always better to repair your bad credit record before applying for a mortgage loan instead of obtaining a bad credit mortgage. This helps you to secure a mortgage with favorable terms and conditions. Read on to know how to repair your bad credit record.
- * Try to repay your existing debts quickly.
- * Order and monitor your credit reports and look for errors, if any.
- * Dispute any inaccurate negative information in your credit report.
- * If you have a huge outstanding debt, consider liquidating your assets to repay your existing dues.
It is advisable that you don’t accumulate further debt until you repay the existing ones. After you have repaid your loans, try to get a new credit card and manage it responsibly. It will help you to increase your credit score.