How to Qualify For a Mortgage with Poor Credit

Can bad credit block me from getting a mortgage loan? This is one question that scares most individuals, especially in this age and era, where the economy is experiencing tremendous changes. One thing to note is that your credit history does matter a lot when it comes to getting approved for a mortgage. With bad credit, therefore, or low credit score, your lenders may consider you at risk of defaulting on the loan. However, this doesn’t mean that it’s the end of the road for you. It may still be possible to qualify for a mortgage, and in this article, I will explain how the magic happens.  

1. Provide Your Utility Bills

While the automatic answer to qualifying for a mortgage with poor credit is ‘NO!’, there is light at the end of the road. Ask me, how? I will tell you boldly that you only need the right approach. One of the best ways to tackle this issue head-on is providing your utility bills. Like, you should be in a position to verify that you have been making your rent payments on time. The verification can include reports issued through landlords. With such reports running from 12 to 24 months, for example, your lender is in a position to tell if you are well-placed to handle the loan or not. 

2. Get a Guarantor

As mentioned earlier, with poor credit or low credit scores, the high chances are that many lenders won’t trust you with their money. Does this mean that you should give up on the idea of owning your dream home? The answer is no. Lenders may have some faith in you if you have a guarantor to help with the application. 

With a guarantor, it means that he or she will pay the loan if your default. If you, therefore, find yourself cornered for bad credit, your first move should be to make calls to your relatives or friends who can help sign up those papers. It’s recommended that you find someone who trusts you and who knows the financial difficulties you may be going through. Going through those close to you means that there are fewer chances of them failing to come through for you as they believe in the repayment plans you may have in mind. 

3. Explain to Your Lender the Situation At-Hand

What causes bad credit? There are many reasons why you may experience bad credit. The most common causes of this menace include; bankruptcy, late mortgage repayments, default, and repossession. These problems may be a result of an illness. Home lenders are also human, and that means that they understand such scenarios. With poor credit, the best you can do is trying and talk it out with your creditor. Let them know the situation at hand, especially the reason for your bad credit. In such an instance, it will help much if you spoke to a mortgage advisor before. Involving a specialist means that you can find a lender that will strike a deal with you regardless of whether you defaulted previously. 

4. Reduce Your Debt Usage

What formula do lenders use to determine the amount of loan that you can afford? Well, the most critical determiner here is usually your debt-to-income ratio. The higher the debt-to-income ratio, the more difficult it’s for your lender to believe that you will be able to pay your monthly loan repayments. So, what’s the remedy to ensuring that your loans are approved? 

When it comes to lowering your debt usage, you have to follow a two-step formula: The first and most important move here is usually to boost your income. You can consider getting a side hassle or ask for a promotion at work. Today, with the internet and stuff, there are many side hassles you can start working on. Once you work on your income, you are needed to work on reducing your existing debts. Like, start paying down credit cards or make more payments on the current loans. This two-step approach will help reduce your debt-to-income ratio hence making it easy for lenders to loan you money. 

5. Shop Around for Lenders

When it comes to shopping for a lender for your mortgage plan, you shouldn’t let one lender discourage you from following the idea of owning a home. It’s recommended that you shop around for different lenders in the market. A thing to note is that lenders have different mortgage overlays. What is a mortgage overlay? Well, this can be considered as an approval standard. Therefore, each lender has an exceptional mortgage overlay, which could help or hurt your chances of a loan depending on the red flags the creditor you pick considers. On this, you may also need the help of a mortgage advisor. 

Today, and with the harsh economic conditions, debts have become the new story in town. This modern economic standard has, in return, led to problems when it comes to requesting mortgage debts. If you are worried about accessing mortgage financing to buy your dream home, this article is rightfully meant for you. It contains five proven approaches you can implement to obtain a mortgage even with your poor credit. By reading through the entire piece, you will have an understanding of why you shouldn’t hesitate to pursue your dream home.