by Sophie Kinsella
If you have a poor credit history due to a bankruptcy or missed credit card payments, you may be worrying about the prospects of taking out a home mortgage loan if you’re interested in getting yourself a new house.
Well, though it becomes tougher to take out a home loan at an affordable rate, it is not impossible. You just have to calculate your mortgage loan amount through a home mortgage calculator and then start off with the comprehensive market research.
You may come across lenders who would wish to lend you a mortgage loan despite having a poor credit score, but you need to make sure that you get the loan at the most affordable rate possible so that you don’t have to scrimp later on while repaying the loan. Here are some vital steps that you have to take before you take out a home loan.
* Improve your credit score: – The faster you take steps to improve your credit score, the faster you’ll be able to take out a home loan at an affordable rate. The credit score is the most important number that is checked by the mortgage lender before lending you a home loan.
You should pull out a copy of your credit report and then check the errors so that you’re able to make sure that the erroneous information doesn’t pull down your score. As you have gone through bankruptcy or missed credit card payments, you should initially ensure that you take out a home loan with a good credit score.
* Save enough money for the down payment: – Due to poor credit score, you’ll already be getting a sky-high interest rate on the loan and if you still can’t pay down at least 20% of the loan amount, you can never dream of taking out a loan at an affordable rate.
You just need to repay the unsecured credit card debt and all the other debt obligations that are increasing your debt-to-income ratio. The lower your DTI ratio is the lower will be rate that the lender will allow you on your loan.
* Shop around among different lenders: – You should get multiple quotes from multiple lenders so that you may easily choose the best loan in the market. Try and get at least 5-6 mortgage quotes so that you can easily choose the best one with the best terms and conditions and with the lowest closing costs. However, don’t be foolish enough to choose the first mortgage loan that you come across. This might make you suffer in the long run.
* Look for sub-prime mortgage lenders: – There are sub-prime mortgage lenders who lend mortgage loans especially to those who have a poor credit score. You should shop around among the sub-prime mortgage lenders so that you can take out a loan that is within your means.
Therefore, when you have a poor credit score and you feel that you can’t take out a home mortgage loan, you should follow the above mentioned points.
Make sure you repair your credit score and also get all your documents in place in order to avoid delaying the entire process due to your ignorance. Don’t forget to make calculations easier through a mortgage calculator!