If you plan to obtain a home loan but with an imperfect credit history, perhaps one of your worries would be submitting a large amount of down payment. Indeed, many mortgage loan companies will require a bigger down payment from customers with a spotty credit.
Nevertheless, if you’re short on cash, is it still possible for you to get a home loan even without paying down a big amount of money? In reality, there are two strategies that you can do to improve your odds of getting an approval. What are those two steps? One is to raise your credit score and the other is to find a co-signer with impressive credit history. Let’s take a closer look at these steps one at a time.
Improving Your Personal Credit Rating
True, there are loan companies that offer bad credit home loans. Nevertheless, even if you are aware that you have bad credit, does that mean you should push through with your loan application without even trying to improve your credit rating? Certainly not!
After looking for loan companies that offer bad credit mortgage loans, the next step you should do is to check your credit report. Try to boost your rating by correcting errors or incorrect details in your file. You can do this by contacting the credit report agency that issued your report.
It is important to understand that the rate of interest you will be offered will also depend on your final credit rating. Hence, increasing your personal credit score by even a few can win you a much lower interest rate despite having an imperfect credit.
You may have to wait up to 30 days for the credit bureau’s investigation to complete. This is why you should check your credit report at least three months prior to applying for a bad credit home loan. During this span of time, take advantage of your opportunity to shop around and explore your options before signing up for a deal.
Remember, predatory lenders do exist in the market and these lenders may try to take advantage of your situation by offering you an instant mortgage loan with no down payment, and yet packed with high interest rates and unreasonably high fees.
Find a Co-signer with Excellent Credit
If you have a family member or a friend with excellent credit, you can ask them to co-sign your bad credit home loan in your behalf. By having a co-signer who will guarantee your repayment, you significantly increase your chance of getting approved.
You co-signer must understand that agreeing to guarantee your loan is a serious responsibility. In case you default with your payments, it will be your co-signer who will be held accountable to continue the payment of your loan. With this in mind, it can be difficult to find a co-signer especially for a loan of this type. Still, if you want to get a bad credit home loan without giving a large down payment, having a co-signer can make the difference.