Mortgage Options for People with Bad CreditWhen your credit score is low, your borrowing options are limited. But there is hope for your homebuying dream. Don’t get overwhelmed. There are programs available and people willing to help you.
How Can I Get Approved for a Loan With Bad Credit?
A great time to apply for a home loan is when interest rates are low. However, many borrowers feel that there is an “if” involved in that statement: A great time to apply for a home loan is when interest rates are low if you have a good to excellent credit score.
So what’s a borrower with a bad credit score to do?
There are still opportunities and options to act while interest rates are low for borrowers with bad credit. Keep in mind: a lower prime lending rate affects all loan types. So while you might not get the best terms, you are likely to get a better rate than you might get at another time.
Are There Mortgage Loans for Bad Credit?
The federal government has multiple loan options, such as an FHA loan, VA loan or USDA loan available to homebuyers with low credit scores. Sometimes there are also local and state grants or programs available.
Understand your credit history before applying for a home loan, even if you have a great score. Secure free credit reports so that there are no surprises when you meet with your loan officer and start the application process.
A local, personal loan officer will be your best source to discover your options in your area and how you might qualify. In addition to helping you determine the root of your bad credit, loan officers can work with you to find your best options. (For instance, holding balances on too many credit cards can lead to “bad credit.”)
In some cases, a higher down payment can help you offset a poor credit score.
Beyond seeking out other loan options, the best thing an aspiring homebuyer with a low credit score can do is raise their credit score. Raising your credit score is achievable and doesn’t take years to overcome. You can accomplish many of the techniques quickly without spending a dime.
Odd as it sounds, the lower your credit score, the easier it is to improve it. In fact, when you begin with a low credit score, increasing it by 100 points isn’t an unrealistic expectation.