Are you wondering whether you can get a home loan with poor credit? It can be difficult to get a home loan but may not impossible. There are some lenders who are willing to work with consumers with blemished credit report. Therefore, you can also get a home loan despite your bad credit if you follow the steps given below.
Here are a few essential steps to get a home loan with poor credit:
1. Review your credit rating: Make sure you review your credit rating before applying for a home loan. If you have a score below 620, then it is considered as a bad credit score. However, if you have a score between 620 and 680, then you can apply for a home loan.
2. Improve your credit rating: Try to improve your credit score if you have time before applying for a home loan. Pay off your debts in order to improve your credit rating. Once you improve your credit rating it can help you get a home loan on favorable terms.
3. Calculate your monthly mortgage payment: You can create a budget and calculate your monthly mortgage that you can afford to pay off. You may not be able to make payment on your home loan if you have overwhelming debts. Therefore, budgeting can help you estimate the amount that you can afford to take out and avoid getting into debt.
4. Make large amount down payment: You can use your savings or borrow from your close relative in order to make large amount of down payment. If you make large amount of down payment, then the lenders may provide you loan on favorable terms. Your lender may consider you financially responsible when you make large amount of down payment as it reduces your monthly payment amount.
5. High interest rate: When you apply for a home loan with blemished credit report, the lenders may charge high interest on the loan. Consumers with blemished credit report are considered to be high risk borrowers by the lenders. Therefore, the lenders in order secure their position charge high interest rate on the loan. If you make large down payment on your home, then you can manage to lower the interest rate.
Therefore, it may not be difficult to find a home loan with blemished credit report but you may not get a loan on favorable terms.