Adverse Credit Mortgage Loans – 3 Tips on Getting Approved
All types of mortgage loans are available for people with adverse credit. Regardless of your credit score, you can purchase a home. What is difficult is finding the right rates with the right terms. Fortunately, with a little bit of research and work on your part, you can do it. The following three tips will help improve your chances of getting approved for the right type of mortgage.
1. Prime Your Credit Report
Start by look at your credit report before you sign up for any credit offerings. You can get a free copy through credit monitoring companies as part of a promotional offer. They will usually include your credit score too. You can also get a copy through the credit reporting agencies.
With your credit report in hand, check that it is accurate. If you do see any mistakes, makes sure you get them resolved. You also want to be sure that account information is accurate. For example, you could have open accounts that you thought were closed.
You can also improve your credit score by paying down debt, not having any maxed accounts, and increasing your cash reserves. You may also consider closing unused accounts. However, in certain cases this can lower your score – particularly if you have had the account for several years.
2. Start With a Pre-approved Loan
A good place to start with mortgage shopping is online. In a few minutes, you can have several dozen different quotes waiting for your review. In this no pressure environment, you can look at several different kinds of terms to find what works with your budget.
Once you know what kind of mortgage you want, you can start comparing lenders. The APR will be the most helpful comparison tool. Also check refinancing or early payment clauses.
Don’t hesitate to get a pre-approved mortgage when you are ready. By doing the paperwork for a home loan first, you know what kind of numbers you are working with. You may decide that for lower rates, you want a smaller loan, or that you can handle a larger mortgage since you don’t have PMI with subprime lenders.
3. Plan Your Down Payment Strategy
Another way to qualify for lower rates is to have a large down payment. 3% to 10% will get you into the average mortgage. But, down payments of 20% or more can greatly improve your rates. Don’t forget that you can also tap into your equity with a second mortgage if you need too.