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The hardest part in home buying is to
obtain mortgage loan. And if you have a not-so-good credit report, it
could be increasingly challenging. Can a person with bad credit rating
get his mortgage loan? Fortunately, the answer is 'yes'.
While there are lenders who are willing
to offer subprime loan, you can take advantage of that. And you have to
know what requirements you need to fulfill to entitle yourself for it.
How to Get a Home Mortgage Loan
with Bad Credit?
Credit Report
- You have to obtain
your latest credit report. This is important for two reasons. Firstly,
you are going to submit it to your lender as a reference. Secondly, you
need to be really clear about your current situation, as your credit
score would significantly determine the rates you are getting.
Therefore, do not let your lender take advantage of you if they tell
you your credit rating is much lower than what you have got in the
report. When you know your situation the best, you can stand firm and
negotiate.
Your Cash - You need to save
enough for your down payment. As you have a bad credit score, you have
to pay 20-25 percent of your house value as an upfront payment. Buying
a $100,000 house would require you to have at least $20,000 in your
savings.
Debt-to-Income Ratio - Your lender
would have a good overall view of your debt status. Debts like car
loan, personal loan, credit cards etc would be taking into calculation
together with your pre-approved home loan to evaluate your
debt-to-income ratio. This lower the ratio, the stronger your position.
Ideally, the ratio should not be higher than two-third.
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