8 Tips on How to Get a Mortgage With Bad Credit
February 17, 2023 | Posted by: Keith Leighton
8 Tips on How to Get a Mortgage
With Bad Credit
When applying for a mortgage with bad credit, there are a number of things borrowers can do to help their chances:
1. Get a copy of your credit file
All of your prospective home loan lenders will have a close look at your credit history before granting you a home loan, so you want to be able to discuss the negative marks on your credit file with confidence. You can get 1 free copy of your credit file each year. This will help keep you aware of any negative listings you might be able to fight against using a credit repair service.
2. Take steps to settle any outstanding debts
New lenders will want to know what you’ve done to address your past credit mishaps, so ensure that any defaults are paid and you do the right thing by your previous creditors.
3. See if a credit repair service can help you
Some bad credit listings, if placed on your file without proper adherence to the relevant laws, can be removed from your file. A credit repair specialist can help you in this regard. Removing negative listings from your credit file can help you apply for a regular home loan, avoiding the higher fees and interest rates of a bad credit home loan.
4. Apply for a loan with a specialist lender who looks beyond the numbers
Certain lenders specialize in bad credit mortgages. These lenders look at your credit file and take into account that bad credit can be a result of a lifestyle change, such as divorce or illness, and will take into account your income and other factors to still grant you a loan, even if you’re a discharged bankrupt or have negative listings on your file. You can leverage your employment history and your record of receiving a steady income to help your case.
5. Don’t apply for too many loans in one space of time
Your credit file includes all previous inquiries for credit, which includes past loan applications. Be careful who you apply for a mortgage with if you already have bad credit. Too many inquiries in the same space of time can present another red flag to prospective lenders.
6. Tell your lender about your bad credit listings honestly
As with every lender, a non-conforming lender will look at all the red flags in your credit history. However, they will also ask for an explanation regarding each entry, and you will have to be thorough in the details you provide. If you try to hide something, you won’t improve your credit rating. You will simply make the lender more suspicious. This may lead to your application being declined on the grounds that you were not being transparent enough or fully honest about your circumstances.
7. Avoid applying with a spouse who has bad credit if you can
If your partner is the one with bad credit, sometimes you can avoid rejection and the higher interest rates of a bad credit loan by applying as a single applicant. Just keep in mind that applying solo will reduce your borrowing power.
8. Eliminate your other debts to make your file look better
When your lender looks at your application, they’ll take into account all of your current credit accounts, including credit cards and personal loans. If you can pay these off and close them before applying it’ll be one less factor that will work against you when your lender decides whether to approve or reject you.
Contact a DLC Ideal Mortgage Broker today for expert advice! It is our job to help find the best mortgage product for you.
