Making mistakes is part of being human, but sometimes those mistakes can latch on and follow us for longer than necessary. Wyndham Capital Mortgage is here to inform you that it’s entirely possible to get a home loan even if you’re still in the process of building up your credit to an acceptable score. Learn a few savvy strategies and options that can end with you receiving the keys to your dream home.
Consider an FHA Loan
When you have poor credit or credit that’s on the mend, it’s best that you go right ahead and bypass traditional loans and seek alternative bad credit home loan options. One such option is a Federal Housing Administration loan, also known as an FHA loan. Rather than getting a mortgage directly from the FHA, you instead apply to banks approved by the FHA. Depending on whether you have a down payment of at least 3.5 percent, it’s possible that you can be approved with a credit score as low as 580. If your score is even lower, there’s still a chance of approval, but you’ll need to save up an even larger down payment, about 10 percent of the property’s asking price.
Boost Your Income
While you may not be able to increase your credit score as quickly as you might like before applying for a home loan, you can take steps to give your income a boost. How this works is lenders like applicants with good credit scores and a steady income that allows them to pay back their mortgage every month. Just because you don’t have a good credit score doesn’t necessarily mean you’re unable to pay a monthly mortgage. If you know for a fact you’ve got the income to cover your home loan payments, focus more on that when you apply for a loan and less on the fact that your credit isn’t that great. Lenders may decide you’re worth the risk, but know that there might be strings involved, such as you having to pay for mortgage insurance or putting down a larger down payment.
Focus on the Short-Term
While mortgages are most certainly a long-term investment, you have to remember that your credit score situation is temporary and that you should focus on the future. While you have to pay more for a home loan with bad credit, you can even things out by keeping up with your mortgage payments and paying the rest of your bills on time. Each payment goes towards increasing your credit score and improving your credit history. In a few years, you may have a better credit score and the option to refinance your loan down to a payment that’s easier to manage. A little sacrifice now can equal a lot of savings later on.
Consider a Co-Signer
If you’ve got family or friends who have good credit and are open to helping you out, you can ask them to be your co-signer. Know that just as lenders consider borrowers with low credit scores a risk, the person who agrees to be your co-signer is also taking a risk. That person becomes responsible for paying the remainder of your mortgage should you fail to keep up with payments. Be sure both you and your potential co-signer are crystal clear on this risk. Should the person agree to co-sign on your loan, do everything you can to keep up with payments.
There are several ways to get a home loan even if your credit score is a bit tattered and stained. Borrow, save and spend smart, and make yourself aware of all your options as well as the risks they might entail. Have more questions? Let us help!