Don't Let Your Credit Hold You Back: How To Secure A Bad Credit Home Loan
If you have bad credit, you may think that you're locked out of the housing market. Following the subprime housing crisis that occurred between 2007 -2010, lenders made it much more difficult for people with bad credit to obtain home loans. Unfortunately, that did lock a lot of people out of the housing market. Recent changes have made it easier for people with bad credit to obtain home loans. However, there are still significant steps that need to be taken before bad credit lending can be arranged. Here are four steps you need to take to obtain a home loan when you have bad credit:
Reestablish Your Credit
If you're trying to purchase a home and you have bad credit, the first thing you need to do is clean up the blemishes. Most lending companies will require you to pay off old debt and establish a clean credit history before they'll approve you for a home loan. If you can't afford to pay off your debt all at once, make payment arrangements with each creditor. That way, you can show a strong repayment history once you apply for your home loan.
Meet Compensating Factors
If you're working to secure a home loan while you're working through credit issues, be prepared to meet the compensating factors. These are factors that will help you overcome the low credit score. Some compensating factors include significant time on job, strong rental history, low debt-to-income ratio, and a higher income. If you can meet these compensating factors, lenders will be more likely to approve you for a home loan.
Secure Your Down Payment
If your credit is on the bad side, you'll need to provide a down payment before most lenders will approve you for a home loan. The larger your down payment, the easier time you'll have securing a lender. If you're concerned about securing the down payment, you should know that there are assistance programs available that will help you obtain the funds you need for your new home purchase.
Find the Right Loan Program
Finally, if you're working with bad credit, you'll need to find the right loan program for your home purchase. Working with the right lender will give you a better chance of securing a loan, even with bad credit. If you've been turned down for a home loan, or you haven't applied because you're worried about your credit, contact a wholesale lender. A wholesale lender will find a home loan that's right for you.