Mortgages for Those with Bad Credit – Dreams Become Realities
A mortgage for those with bad credit is an option for those serious about owning a home yet have poor credit ratings. To make the American dream a reality, you must understand a few fundamentals.
People with poor credit histories have dreams of home ownership, too. Young adults are often unaware of the importance of a credit rating and may have made some earlier mistakes that put big dents in their credit histories. Or, in the economic state of today, many folks have just unavoidably taken hits on their credit scores. Unemployment is often cited as a factor. If you find yourself in such a situation, you may be worried that a home loan is impossible. But, that is why the financial markets make mortgages for those with bad credit available today.
Bad Credit Is Not the Bottom Line
Even with a poor credit history, there are other factors that will weigh in when you apply for a mortgage for those with bad credit. You need to educate yourself regarding the home mortgage market and understand what you need to have, where you need to look, and just exactly what you are looking for. Understand that you will have to jump through a few hoops.
Steady Job and Decent Salary
Since your credit scores do not offer much in the way of reassuring lenders that you will repay your mortgage for those with bad credit, you must provide them other assurances. You may have missed some payments in the past, but they want to know that you can make them steadily in the future. They will want you to have a steady job at a decent salary. Three months on the job is usually the minimum, but the longer the better. And they will want to see that you have enough money left over, after you have met all your other monthly obligations, to keep up payments.
Cash Is King
If you can muster a sizable down payment, you have done a number of good things to help you qualify for a mortgage for those with bad credit. First, the lender can see that you have the ability to budget and save. That is a good indicator that you will be able to meet your monthly payment. It shows responsibility and maturity. These traits go a long way in having your lender overlook your poor credit ratings. Also, it will reduce the amount you have to finance and will offer you instant equity in the home. These too go a long way to make the approval easier.
About Credit Histories or Credit Scores
You need to completely understand your credit situation before you go hunting for a mortgage for those with bad credit. Your FICO score is the key. (FICO is an acronym for a business called Fair Isaac Company.) Understand why it is at its current level. Pull your credit reports and make sure every item on them is correct; there are often discrepancies, so fix them. If you have been a victim of identity theft, be prepared to take a number of months to clean up your credit history.
Your Debt-to-Income Ratio
Next to your credit scores, your debt-to-income will be your next qualifier when you seek a mortgage for those with bad credit. Even folks with good credit can be rejected for a home loan if they are carrying too much debt. Pesky student loans, too many credit card bills, and even alimony and child support can weigh against you. As a good rule of thumb, your salary should be used to pay necessary obligations at 40%. The remaining 60% should be free and clear. This is called discretionary income and could weigh even more than a bad credit history.
Do not give up. Should you not be able to land a mortgage for those with bad credit, start an effort to improve your credit scores. Take out a number of small loans and pay them off according to the stipulations of the contracts. Doing this a couple of times over the course of a year will do much to improve your scores and will offer lenders further evidence of your ability and willingness to meet all your monthly obligations.
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ABOUT THE AUTHOR
Melissa Kellett has a Master in Finance and has been a university teacher as well as a financial consultant for years. She specializes in Bad Credit Loans Guaranteed and also in helping people to get approved for home loans, guaranteed loans, bad credit auto loans, guaranteed credit cards, Bad Credit Mortgage Loans among many other financial products. For further information, please visit http://www.speedybadcreditloans.com