Are you on the verge of losing hope for a home loan? This is a natural feeling that every person perceives when his/her credit score less than perfect. Mainly, the lenders fail to offer house loans for low credit score to the borrowers in need. However, things have changed a lot because there are now lenders who can offer nontraditional home loans. Before seeking help from such lenders, you should keep a set of tips in mind.
When you are applying for a loan, the creditor always checks whether you are capable of repaying the amount. Here, the lenders evaluate the credit score to prove your eligibility. Moreover, a higher credit score leads to lower interest rates. So, you can start looking for low credit score mortgage lenders by focusing on your credit report. This will help you understand where you stand and what you deserve as per the score. In any case, the score is next to nothing, you cannot conclude that you cannot buy a house anymore. Go through the following suggestions and get a thorough knowledge of how to find such lenders. If you fail to pick the ideal mortgage lender, you may suffer a lot in the upcoming 15 or 30 years.
Work on the Credit Score at First
It is not possible for every lender to approve any credit score. The borrowers still have to meet the minimum requirements to acknowledge their repaying capability. If the score is lower than 580, you can have a hard time qualifying the loan. In order to better the score, you have to make the credit report error-free. Only get the report from the authentic credit bureaus like TransUnion, Experian, and Equifax. Then, obtain a free copy of the report per year. Also, pay off the high-interest debt as soon as possible. When the debt percentage goes down, only then you can better the debt-to-income ratio.
Find the Suitable Mortgage
There are lenders who specialize in a particular type of loan. If your credit score is above 620, you can choose conventional mortgage (not guaranteed by the government). Generally, the lenders who offer such loans do not hold onto the mortgage for a long-term. The traditional loans are available with 20% down payment and the borrower needs to pay private mortgage insurance. There is also 3% down payment program which comes with low rates, 30 days of closing costs, and FICO score over 620. However, people with minimum credit score of 500 can get FHA loan. Federal Housing Administration insures the loan and the requirements are pretty lenient. Again, when your credit score is 600 and you cannot pay down payment, disaster relief loan program may be helpful. Of course, certain consequences are applicable.
Get Pre-Approved Always
If you get pre-approved, you will get more brownie points than other borrowers. For getting the pre-approval letter, you need to certain information including social security number, 2-year of tax returns, and outstanding debt obligation. If you are ready to choose the home, the lenders can access all the information that they need for processing the mortgage application.
So, don’t forget to ask the loan officers in which program they specialize or whether you can get a pre-approval letter in advance.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.