Before the housing market crisis in 2008, it was not particularly difficult for a person to get a mortgage with bad credit. Lenders were more lenient while borrowers were more confident in their ability to repay their debt. The situation changed dramatically in 2008 and now lenders have very high and very strict requirements. The question is whether you can still qualify for a home loan if you have blemishes on your credit record.
What is bad credit actually?
The term "bad credit" is typically used to refer to financial difficulties which a borrower experienced in the past. However, this explanation is very general. You need to have an idea about the precise factors which can affect your ability to take out a mortgage loan.
Your credit score is a major determinant as it reflects your most recent credit history. Currently, you need a score of 680 to secure a conventional loan from a commercial lender. Late loan payments even on student loans can affect your ability to qualify for a home loan. Your chances will be even lower if the lender notices a pattern of delinquencies.
If you owned a home and it was foreclosed or short sold due to mortgage default, your chances of approval for a new loan will be much lower. In general, you have to wait for 36 months before you can apply for an FHA loan or 48 if you want to apply for a conventional financial product. If you have filed for bankruptcy in the past, you will have to wait 24 or 48 months from the date of discharge before you can apply for an FHA loan or conventional one respectively.
What is the situation today?
At present, lenders are less likely to grant mortgages to people with bad credit. However, even though the borrowing requirements are stricter, they vary considerably from one lender to another. This means that you still have some chances to qualify for a home loan provided that you perform extensive research and compare various different products.
Individuals with bad credit have good chances of qualifying for FHA loans. Since they are backed by the Federal Housing Administration, it is easier to get approved even with a credit score of 620 and possibly a bit lower. You will also have to make a down payment of just 3.5% so you do not need great savings either. You can also apply for such a loan sooner than for a conventional one if you were unable to repay your previous mortgage and lost your property in the past.
What can you do to get a mortgage despite bad credit?
If you have secure employment with fairly high salary and low debt-to-income ratio, you have much higher chances of getting approved for a conventional mortgage loan. You can also adopt a strategy for improving your credit score. You should try to pay all of your monthly bills on time and in full. You should use no more than 30% of your credit card limit and repay the outstanding balance in full every month. You should not take out more consumer loans.
Overall, you can still get a mortgage with bad credit, even though it will be more challenging.
Article Source: http://EzineArticles.com/?expert=Cedric_B_Pitts
Article Source: http://EzineArticles.com/8124417
What is bad credit actually?
The term "bad credit" is typically used to refer to financial difficulties which a borrower experienced in the past. However, this explanation is very general. You need to have an idea about the precise factors which can affect your ability to take out a mortgage loan.
Your credit score is a major determinant as it reflects your most recent credit history. Currently, you need a score of 680 to secure a conventional loan from a commercial lender. Late loan payments even on student loans can affect your ability to qualify for a home loan. Your chances will be even lower if the lender notices a pattern of delinquencies.
If you owned a home and it was foreclosed or short sold due to mortgage default, your chances of approval for a new loan will be much lower. In general, you have to wait for 36 months before you can apply for an FHA loan or 48 if you want to apply for a conventional financial product. If you have filed for bankruptcy in the past, you will have to wait 24 or 48 months from the date of discharge before you can apply for an FHA loan or conventional one respectively.
What is the situation today?
At present, lenders are less likely to grant mortgages to people with bad credit. However, even though the borrowing requirements are stricter, they vary considerably from one lender to another. This means that you still have some chances to qualify for a home loan provided that you perform extensive research and compare various different products.
Individuals with bad credit have good chances of qualifying for FHA loans. Since they are backed by the Federal Housing Administration, it is easier to get approved even with a credit score of 620 and possibly a bit lower. You will also have to make a down payment of just 3.5% so you do not need great savings either. You can also apply for such a loan sooner than for a conventional one if you were unable to repay your previous mortgage and lost your property in the past.
What can you do to get a mortgage despite bad credit?
If you have secure employment with fairly high salary and low debt-to-income ratio, you have much higher chances of getting approved for a conventional mortgage loan. You can also adopt a strategy for improving your credit score. You should try to pay all of your monthly bills on time and in full. You should use no more than 30% of your credit card limit and repay the outstanding balance in full every month. You should not take out more consumer loans.
Overall, you can still get a mortgage with bad credit, even though it will be more challenging.
Article Source: http://EzineArticles.com/?expert=Cedric_B_Pitts
Article Source: http://EzineArticles.com/8124417
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