Getting a mortgage is never easy, and getting a mortgage with bad credit is very challenging indeed. This is a rundown on some tips from our team on how to get that mortgage you need, regardless of your credit score.
The first tip we will share is to broaden your considerations. Consider taking a shorter term mortgage, perhaps around one or two years to begin with. Getting a shorter term mortgage can help you recover from your bad credit while paying reasonably low mortgage rates compared to taking a larger term mortgage.
From this point, brokers can then help guide you when trying to improve your score. This in turn can lead to a longer term mortgage at a better rate.
With a bad credit score, you may be expected to pay a premium on top of the cost of the mortgage. This is due to the simple fact that a mortgage is fundamentally a type of loan and loan goes hand in hand with risk; for both parties involved. While paying more is never on anyone’s check list while looking for a potential mortgage, it may be something you will have to consider.
This is all dependent on how bad your credit score really is and will vary person to person. Non-premium rates are possible to get with a bad credit score if there is a good reason for the score you have; such as a medical expense.
The Time Frame
Time is a factor that will affect how you can get a mortgage with bad credit. Usually, you will have to wait around a minimum of two years before you will be considered by most lenders for a mortgage, after being discharged.
However, some private lenders will accept people with bad credit no matter how long you have been discharged for. This will cost you more and require you to put a larger amount of money down right away. Some private lenders will even consider taking people without them being discharged but this too will be costly financially.
If bad credit is getting in the way of you getting the mortgage you need, earning back credit may prove that you are more reliable. The most common way to earn back credit or improve your credit score is by using a credit card that is secured. Using this type of credit card frequently and correctly can give your credit score the boost that you may need to get that mortgage. Another method our team recommends for improving you credit score is getting a non-prime mortgage.
In terms of using a credit card, pay it back on time for around 12 to 24 months continuously without missing a payment, be sure not to exceed 60 percent of the spending limit on the card and always make more than the minimum payment. These will get you on the road back to a good credit rating. Always be sure to do your research into what card will be right for you, as cancellation of a credit card will be bad for your overall credit score.
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Factors To Consider with Bad Credit
When looking for a mortgage that isn’t a prime one, these factors can potentially help or hinder your search:
• High debt; getting into a large amount of debt will most likely serve as a warning sign for any future lenders that may consider you.
• When looking at taking out a mortgage, the more money you put down up front, the better the rates will tend to be.
• Employment. If you are not in a stable form of employment, getting a mortgage or even a loan may prove difficult. If you have a history of short employments, this can affect how much lenders may be willing to lend and for how long.
• The lender that you go with will affect how much you pay. Private lenders will always charge more for lending you money.
• Property. The type of property that you own will affect if lenders will consider you or not. If you have a property that is not very marketable, lenders may tend to deny you any funds. Simply put, if they are forced to foreclose, they want a property that is easy to sell.
So above are some tips from our team as well as aspects to consider when looking for a mortgage with bad credit. Our last recommendation is to consider trying to improve your credit score before locking down a mortgage deal.
Contact our mortgage experts today