Getting The Best Mortgage Loan With A Bad Credit

Getting the​ best mortgage loan with a​ bad credit
For most people,​ applying for a​ mortgage loan to​ buy a​ house is​ one of​ the​ biggest and the​ toughest lifetime financial exercise .​
It gets even more difficult for those who have had a​ bad credit history .​
Even though people with bad credit are at​ a​ disadvantage,​ lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the​ best but which at​ least provide them with an​ opportunity to​ own a​ home .​
In order to​ get the​ best possible mortgage options,​ a​ borrower has to​ impress upon a​ lender that in​ spite of​ a​ bad past,​ he is​ financially responsible .​
To convince the​ lender of​ your credibility,​ the​ foremost thing to​ do before applying for a​ mortgage loan is​ to​ start clearing the​ red flags that mark your credit report .​
Begin by reducing your credit card debts as​ much as​ possible .​
Similarly pay off other debts like car loans or​ auto debts,​ particularly if​ they have more than 9 monthly installments left,​ since auto debts with less than 9 payments are generally excluded from debt calculations .​
The next best thing to​ do is​ start saving big for a​ good size down payment on​ your home .​
Since you​ fall in​ the​ bad risk category for a​ lender,​ the​ bigger the​ down payment,​ the​ more it​ assures the​ lender of​ being able to​ recover his cash in​ the​ event of​ a​ future default .​
Do remember to​ include closing costs when saving for your down payment as​ they can add as​ much as​ 3% to​ the​ purchase price .​
Overall,​ saving more than 20% of​ the​ total purchase price should improve your credibility .​
The borrower should target and reduce his monthly liabilities to​ less than 50% of​ his total income in​ order to​ give confidence to​ the​ lender about his ability to​ repay his mortgage loan without any defaults .​
It is​ never to​ late to​ get into better financial habits,​ like reducing the​ use of​ credit cards and postponing large purchases .​
At this point of​ time,​ it​ is​ wise to​ hold on​ to​ your present job and not make any unnecessary jumps .​
a​ steady employment of​ over two years adds to​ your image as​ a​ consistent and stable person.
Lenders will go through your bank statements to​ figure out your expenses and incomes .​
Any unusual entry may raise question marks .​
If a​ friend or​ family member gifts you​ money to​ help you​ purchase your house,​ make sure the​ lender know it​ is​ a​ gift and not another loan .​
Reveal all your liquid and cash reserves that you​ own since lenders judge your paying capacity from them and generally prefer that they have at​ least two month’s reserve of​ the​ monthly mortgage payments .​
Last but not the​ least,​ even factors like prompt payment of​ house rents,​ phone bills,​ insurance premiums and other financial bills add to​ your credit worthiness .​
Finally,​ even after you​ have spruced up your credit image,​ make sure to​ approach more than one lender and compare their lending terms and conditions in​ order to​ get the​ best mortgage loan.

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