Bad credit can lead to being rejected for a traditional mortgage or can make your interest rates skyrocket. With bad credit, this could have just been some bad financial decisions that are haunting you from years ago. There is a chance that it will be far wiser to build your credit score before applying for a mortgage. A refinance of the home is another option after a few years of paying a high-interest rate but this still requires you to pay larger amounts of interest than make sense.
The creation of a checklist can be immensely important as building a list of documents and things to do can provide direction. Below will delve into what should be included on your checklist:
- Start improving your credit now by paying debts and paying other loans on time. Paying a car off on time can allow you to make a myriad of payments on time. Give yourself around 90 days to start improving your credit as even a small jump will make a difference. Errors could be lowering your credit score if you have previously paid an outstanding debt.
- The creation of a budget can allow you to not accrue any debt when looking for a home. Small savings on monthly fixed costs like cable or a phone bill can easily be dropped by going to another provider. The ability to put down a certain percentage of a property’s cost in the down payment can quell the fears of lenders.
- Do not close credit cards even if you are not using it as this can drop your credit score for a little bit.
- Do not delay on any of this as the difference in 25 points on a credit score can be the difference between receiving a mortgage and being rejected.
- Take a look at the different federal programs that are available. If you are a veteran or first-time homebuyer there are plenty of options for you.
- If you are married to a person with great credit this is good. A family member with good credit being a co-signer can help alleviate the concerns the lender has about not being paid back on time.
- Create a list of lenders that are known to work with people that have spotty financial backgrounds. There are so many options online and through banks that will compete to close on a home loan.
- For those that are self-employed, it is important to get letters from huge clients that will help prove annual income. This might be uncomfortable but for clients that you have a good relationship with, this should not be a problem. The process has gotten a bit more thorough after the housing market collapse in the last 2000s.
- Search “apply for credit loan with bad credit” then create a list of what you need to do in the next couple of months. With the right tactics, you can boost your credit score to the acceptable range for a great interest rate on a mortgage.
Do not let your credit get you down as you could be a few steps from improving it and receiving a mortgage at a rate you desire.