It is a dream for almost everyone to own a house. But sometimes due to a bad financial condition, it becomes difficult to own a home as the time flies. In this case, you might have to opt for a mortgage to buy a home. But there are many factors which affect your chance of getting a mortgage. Lenders look at a variety of things while considering your application for a mortgage. In addition to a credit record, they also look at your income, expenses, down payment and house value.
If you have a bad credit score and are struggling to get a mortgage then one obvious question which must be puzzling you will be: How to get a mortgage with bad credit but good income?
In fact, getting a mortgage with low credit score is not the easiest thing in the world but it is far from the impossibility as many people believe. A bad credit score is not a death knell to your application and there are many online lenders who are willing to take the risk by considering loan application of borrowers with less than perfect credit score.
In fact, direct lenders are thought as experts in lending to the people, so getting approval with poor credit score is more likely to happen.
Obviously, you have to accept some terms and conditions before lenders can secure you a deal. One such condition is a high rate of interest. But that should be fine for you as you are getting a chance to buy the home of your dream.
Norms to Meet
Like all loans, the first thing an applicant has to face is to meet the basic norms before they can hope to get a mortgage with low credit. There is no secret about this criterion, with age, resident status, and proof of income.
According to low, an applicant must be over the age of 18 years before the lenders can consider them for a mortgage and they should the citizen of the lender’s country.
Applicants must also have a reliable and regular source of income and income should be large enough to sustain the repayment of the mortgage on a regular basis. Only then they could qualify to get the approval with a dismal credit score. Your bad credit only impacts the interest rate a lender is going to charge.
Importance of Debt-to-Income Ratio
Your low credit score will influence the rate of interest charged. A high score means a low-interest rate will be charged and a low score means a high-interest rate will be charged. But the important factor to get a mortgage here is your current debt-to-income ratio.
The debt-to-income ratio means the amount of money left to make the repayments. The idea of getting an approval with an abysmally low credit record is based on the fact that even those borrowers who have an issue with their credit score, they can get the mortgage if their ration is good.
Rejection is certain if you don’t meet the criteria set by the lender. In this situation, even a high income cannot satisfy the lenders.
A better way to solve this problem is to reduce your debt-to-income ratio before applying for a mortgage. You can take a small debt consolidation loan and pay all your existing debt in one go, which in turn will lower your debt-to-income ratio.
Make More Down Payment
One thing that you should do before applying for a mortgage, save some money for the down payment. It is a good practice to have some down payment. The reason behind this is that with a down payment, the amount of mortgage will become lower. By providing a large amount as down payment, the mortgage becomes more affordable.
Also, it is an obvious fact that the smaller the mortgage, the higher is the chance of approval. With a lower amount, a low-interest rate may be charged by the lender and your monthly repayment will become easy.
Where to Get
The first venue where any home seekers go is a traditional lender but one must remember that a conventional lender is very unlikely to provide a mortgage to someone who has a bad credit record. The terms and conditions of these lenders are very stringent which make the approval very difficult. Often a very large down payment is asked by these lenders.
The best option is online lenders or direct lenders who have multiple types of mortgage available for borrowers with a bad credit score. They are often the best and fastest way to secure a mortgage.
Hence, in conclusion we can say that even those who have suffered financial obstacles in the past, there is a hope to get a home of their own. The availability of mortgage from direct lenders makes this possible.