Many of us who have bad credit, think that we can’t get a mortgage. Poor credit is not a barrier when it comes to getting loans, and we're here to help. Some people might think that mortgage financing with bad credit isn't an option for them but in fact there are lenders who can help you get a mortgage even if you don't have perfect credit.
Besides adjusting your mortgage search to fit specific programs that cater to people with bad credit, you can get a loan through normal means like making a large down-payment on the property, improving your credit score and borrowing from a non-prime lender.
What Are Mortgage Brokers?
A mortgage broker is a middleman who connects a potential lender to a homebuyer. Unlike a mortgage lender, a mortgage broker can help you find the perfect home loan lender to suit your financial situation.
Mortgage brokers do all the work and paperwork to find and secure the best mortgage for your needs. All your loan, insurance and credit needs will be met so you can concentrate on running your business.
Mortgage brokers have access to many lenders, giving you more choice than just directly dealing with one. Picking the right mortgage lender is crucial for closing your deal. A mortgage broker will always help you find one, and facilitate all other aspects throughout the mortgage process until taking your property off the market.
What Is a Non-Prime Mortgage?
A non-prime mortgage is used by borrowers who have a low score, low credit rating or poor credit history. A poor credit score can shorten your chances of getting a home loan. Lenders predict a higher chance of default and decide to invest their funds somewhere else.
Poor credit-scores come in different variants and depend wholly on what type of loan you're applying for.
- FHA loans
- Conventional loans
- VA loans
- Jumbo loans
- USDA loans
Lenders often look into your credit history, assets, and other variables to assess your eligibility for a home loan. To get a complete overview of what had happened with your finances and when, we'll analyse your credit file. This will also show how it impacted you financially. This analysis helps lenders determine the mortgage terms. Such things include the interest rate and the preferred LTV ratios.
If your credit is not great, you might be offered a loan with a higher interest rate to make the risk worthwhile. Non-traditional lenders may ask you for a larger down-payment or deny your loan request, even if you're approved.
If you cannot find the right type of loan for your needs, it might be worth exploring offers from providers who focus on borrowers with poor credit. They often offer very competitive rates and should be able to help you find a solution. These niche lenders can often look past factors such as age, the cause for why you have a lower credit score, and how likely it is to be better in the long run.
Having a stable income, a big deposit or other favorable factors can help you get a competitive deal from a mortgage provider with poor credit. You should note that not all lenders advertise their bad credit mortgage offerings, so it may help to speak with a licensed mortgage broker to increase your chances of getting a good deal.
How to get a mortgage with poor credit?
If you have a poor credit score you will find it hard to get a mortgage as lenders will not want to deal with as much risk. That doesn’t mean there is no hope for getting one though, here are some tips on how to improve your chances.
Compare Several Lenders
Some lenders offer better rates & fees than others. Compare and consider what they offer so you could save on the pursuit of your mortgage.
Find a Co-signer
Chances are you know someone with better credit than yourself--a family member, friend, coworker, etc. they can sign onto your mortgage agreement to help give it more legitimacy when applying for a loan. One of the main reasons a home loan application may be approved is because a co-signer provides a good credit history to back it up.
However, the co-signer will be responsible for the entire debt repayment if you default. They could also face negative consequences if payments are missed or arrive late.
Explore Different Lenders
There are now many banks out there who offer mortgages as well as different types of loans. If you need a variety of banking services, these financial institutions could be the one for you. You can apply for mortgage loans from just about any type of lender these days, including banks, credit unions, mortgage brokers, or lenders that may not have a brick-and-mortar location. Explore & choose the best service for your needs
Improve Your Credit
If you have a bad credit record, it may take a few months to get it out of the red. In the meantime, try working on your credit score by paying any outstanding debts off and creating a payment plan for future repayments. When it's time to apply for a mortgage, make sure everything is in order beforehand! Some effective ways of improving your credit rating include:
- Making on-time payments
- Disputing credit report errors
- Paying down high-balance credit cards
Offer Bigger Down Payment
Some lenders are happy to take your application, even if you have poor credit, as long as you put a larger sum down. If you have a chunk of cash that's a sign that you're not a high-risk borrower, which means they're going to charge you less in interest.
Get a Mortgage Broker
A good mortgage broker will know which lenders would be suitable for your particular situation. It’s worth working with a professional who can advise you on a non-prime mortgage. These mortgage brokers work closely with various different non-prime lenders, and can help you narrow down your options to find the right lender for your needs.
Final Words
It's not easy to get a mortgage these days if you have an "unacceptable" credit score. But we hope this guide will help you along the way! If you haven't found anything the traditional way, try looking for specialty lenders that specialize in helping people with poor credit get mortgages. There are a few other ways you can get a loan with no credit, like finding someone to co-sign, getting your credit better, and paying more of the down payment.
Hiring an experienced mortgage broker will make the process much less stressful and help you negotiate better rates on different types of loans.
Our mortgage broker team at Cornerstone Capital Financial Services, LLC has helped thousands of home buyers find competitive mortgages for about 20 years. We can help you too. Just give our friendly team a call at (201) 514-5942
