Borrowers with limited knowledge and experience of real estate often live under the impression that if they have bad credit, they cannot get a mortgage.
This is a major misconception; while it is true that it is difficult to acquire the best mortgage with a poor past record and that such a borrower’s options are limited compared to someone with good credit, this does not mean that there is no way you can get a mortgage.
In fact, there are instances where people with perfect credit histories, or those with no past debts at all, are denied mortgages.
This means that a bad credit
score is not all that ruins your case, even while it does majorly impact it.
Whether or not you successfully get a loan at the end of the day depends on a
number of factors, and actually getting one has to be strategic and informed.
Who gives a mortgage on bad credit?
Several people with bad credit end up believing they will never own property, simply because they’re looking in the wrong places.
While banks and credit unions may tell you there is no way you can convince a lender to fund your purchase, the fact is that there is bad credit mortgage lender out there who work to provide mortgages to those with adverse credit histories.
Why would they do that?
Simple because they can reap benefits like higher deposit and interest rates out of them. To find the best lender for yourself, it is extremely important that you find a reasonably priced poor credit mortgage broker.
Working with an expert in such a case will save you a lot of time and money since your broker will know exactly which lenders to approach, and which are likely to lend to your specific case.
How to get a bad credit mortgage?
To get a loan, you first and foremost must obtain and scrutinise your own credit report. It is essential that you are well-familiarised with the bumps in your own report before you approach a lender with it.
Depending on the specific factors that led to your poor credit history, your broker will guide you on which lenders to consult, and what your chances of acquiring a mortgage are.
Usually, a skilled broker will be able to secure a loan with the blemishes on the credit report. From no credit history to poor history and from later payments to bankruptcy, there is a way around every factor.
However, you must realize that giving a loan to someone who has previously failed to make payments is risky for any lender. To decrease the risk factor involved and to prove your reliability, you will most likely have to place a large deposit.
How to improve credit score?
While you consult bad credit mortgage lenders, it is also important to start working on improving your score so as to improve your position with the lender.
One way to do this is to get a credit card specific to bad credit history so that you can use it and make payments by the end of the month.
Given that all payments are clear, your score will begin to rise.
Alternatively, you can consider a co-signer with a good credit history. This could be a spouse, parents, or any other relative. With another name on the documents, you might just be able to avoid a bad credit mortgage altogether.
All in all, you must hire a broker to not only help with your current score, they will usually have access to all the potential lenders and will get you the best deal of all.