If you are a borrower with limited experience, a low credit score can be a major setback.
You might think a low credit score means you absolutely cannot get a mortgage, and that you will be rejected for every loan you apply for.
certainly is true that a low credit score limits your chances as well as your
options, fortunately, it does not mean you can’t secure a mortgage.
Securing a mortgage with a low credit score is possible, but it rigorous and complex.
It is absolutely vital for those with a poor credit history looking to secure a mortgage to hire an expert broker who specialises in low credit score mortgage.
A broker will act not only as your consultant but also as the intermediary between you and the lender, carrying out conversations and formalities for you and making sure there are no risky steps taken to worsen your already tarnished case.
When you hire a broker, the very first step will be to understand your own credit history and score.
If you have limited experience with borrowing, it is natural to not understand the complexities of your credit issues. It is especially complicated because credit firms send information to different agencies - TransUnion, Experian and Equifax - so understanding your score and related issues means approaching all of these agencies for details.
A broker will help you put this information together and explain it to you before you can proceed on to attempting to secure a low credit score mortgage.
Common Mistakes in Seeking Low Credit Score Mortgage
In an attempt to get a mortgage with low credit scores, individuals working without experts often make some common but highly detrimental mistakes. One of these is making multiple applications.
As an individual, you may think the best idea is to approach as many lenders as you can, or at least fill out online applications.
However, like an expert broker will tell you, some knowledge and research in the field will tell you there are certain organisations you should not even apply to, simply because they do not accept any borrowers with adverse credit.
Not only is applying to such lenders a waste of time, but multiple rejections are also detrimental to your reputation and credibility as a borrower.
Other common mistakes include believing that you absolutely cannot get a decent mortgage, and settling for one that ridiculously overpriced in terms of rent, with a massive deposit.
While you certainly will have to place a larger deposit and will not get the best interest rate on the market, don’t let small lenders convince you to have no choice but to settle for the worst; with a mortgage broker, you may be surprised with the options you still have.
First-time buyers also make the mistake of agreeing to pre-payment penalties.
This is a trick clause in the mortgage agreement that allows the lender to demand extra money from you in case the mortgage is paid off earlier than its deadline. Lenders may sometimes trick you into believing that it will reduce your debt, but it really is just expensive trap rookie buyers often fall into.
Boost Your Credit
Your broker may suggest that you find a co-signer and/or that you place a large deposit. These are great tips that certainly will increase your chances of securing a low credit score mortgage.
While you are at it, however, don’t forget that the ultimate solution to bad credit is to improve it.
While this is a long-term process, you must start early. Pay down all your debt and make sure you make credit card payment on time.
You might even want to take out a new credit card and complete all payments. Every little step goes a long way!