Getting a Mortgage with Bad Credit
Many people dream of owning a home, but sometimes, financial pitfalls we have had along the way can stand in between us and our dream home. It might seem like people are buying homes up left and right—do they all have perfect credit? Not necessarily. Here at All My Sons Knoxville movers, we want to help you figure out how you can snag a mortgage loan with less than desirable credit.
If your credit score is under 680, here are some things that you need to keep in mind:
You need to be prepared to pay more than the average loan recipient. Your mortgage payment will hinge on your credit score, and if it is lower than you are more of a liability.
One of the highest factors contributing to what your mortgage rate is will analyze what is making your credit score low. Are you delinquent? Filed for bankruptcy? The options are endless.
It can be difficult to obtain a mortgage loan with bad credit, period. Be prepared that you might leave the lending office empty handed.
Higher interest rates are typically a given with a lower credit score. Calculate out the difference between 30-year fixed mortgage rates and realize what a difference a few credit score points can make. Can you remedy your score and wait a few months? 20 points can make a huge different on your rate when you figure the total calculation over the life of the loan. Plus, it will impact what you pay monthly towards your mortgage.
Profession also pays a role. For example, high paying professional jobs like a doctor might have extensive funds in the bank, but being so busy with work they can forget to pay their bills on time. These scenarios can be evaluated on an individual basis, and proof of funds is definitely a strong player to have on your side when your credit score is less than desirable.
The average credit score given a loan by the Federal Housing Administration is 693 and that average is rising a few points at a time each year. Even when lending was looser, back in 2006, only 18% of borrowers had scores under 620.
Despite the obstacles, even borrowers with scores below 580 sometimes can get mortgages. Subprime loans – for borrowers with low scores – got a bad name because of dangerous features often attached to them at the end of the housing boom: stated-income loans, with no need to prove you qualify; option ARMs that led borrowers deeper into debt; and low, low teaser rates that exploded eventually into higher rates with hopelessly exorbitant payments.
Remember, there is hope for getting a mortgage even with a low score! However, if you have the ability to wait a few months and try to remedy your score, it can make a difference in your overall score and help you lock in a better long-term rate.