Just because you have bad credit, it doesn’t mean that you won’t be approved when applying for a mortgage. But, there are a few things that you need to do to reduce the chances that you will run into financing issues when you are preparing to buy a home. If you are applying for a mortgage this year, then you need to follow these tips:
Down Payment Preparation
It is hard to qualify for a down payment assistance program if you have a low credit score. Lenders want to see that you have “skin in the game,” so they will often require that you provide the down payment for the purchase.
Be prepared to offer a down payment, which means that you need to save up the cash that will be necessary. Or, work to get your credit score above 640 which will increase the likelihood that you will qualify for down payment assistance when applying for a mortgage.
Rebuild Your Credit
Don’t stress if you applying for a mortgage and you aren’t approved. Often, rebuilding your credit only takes a few months. Talk to us to get tips for credit rebuilding strategies so that you can get your credit score up to about 620 if possible. But, there are situations where people can be approved for FHA loans with credit scores as low as 580. We can get you in touch with the lenders that might work with you so that you can buy a home.
The best steps to rebuild your credit are paying down high credit card balances, filing disputes if there are errors on your credit report, and improving the standing of bank accounts that might be delinquent.
Improve Your Debt-to-Income Ratio
Having a high debt-to-income ratio can make it harder to get mortgage financing, especially if you have a low credit score. Pay down some of your balances to improve this ratio. You will find that your credit score can improve from these efforts as well.
Consider Refinancing Options
Do you want to sell your current home and move to a new property? You might be able to work out a deal with cash-out refinancing. This loan will allow you to borrow against the equity in the house so that you can pay down credit cards and installment loans. Wrapping the payments together can improve your financial picture, and lenders are more forgiving when they don’t see high credit card balances.
Make sure to talk to an industry professional and read the fine print before signing on the bottom line. This solution doesn’t make sense for every family since the closing costs need to be paid. A good lender can help you compare your options to optimize the results of this financial decision.
If you want to buy a home and you are applying for a mortgage and you are worried about your credit score, then you need to talk to our team here at DUFFY Realty or the good people at Peachtree Home Loans. We can help you find the resources that will improve your credit score to get the financing that you need: (678) 318-1700