Items you will need
- List of reputable banks and lenders
- Asset list (land value, cash in savings)
Buying a home is one of the most important purchases you’ll make in your lifetime. If you’ve got substandard credit, qualifying for a mortgage may be tough, but it’s not impossible. Since you’re considered a high risk, you’ll probably pay more until you can change your financial habits and improve your credit. Consider some ways to obtain a mortgage, even if your credit rating is not perfect.
Getting a Mortgage With Less-than-perfect Credit
Pre-qualify at your local bank, where they know you and your credit history. Find out what is needed to become approved. You may have to save extra cash or repair your credit and reapply when your credit score has improved, but at least you’ll know exactly what your lender requires.
If you own your own land free and clear, you can use it for equity in a mortgage when building a home. Even if you still owe money on the land, lenders will often refinance the land debt into your new mortgage, provided there is sufficient equity.
You might want to apply for a stated-income loan or a no-asset-verification loan if you have plenty of cash. The lender bases its loan decision on the income source you indicate on your loan application, without proof. According to the AAA Fair Credit Foundation, these loans are considered predatory loans and are usually made by shady lenders at exorbitant interest rates with countless fees and unethical practices.
Consider asking a co-signer when applying for a mortgage. Choose someone who has steady, verifiable income and a solid credit history. Choose your victim wisely because if you default, your cosigner will be fully liable for your debt.
Check into federal and government mortgage products such as the USDA Rural Development Program, Fannie Mae or Ginnie Mae. The USDA Rural Development offers low-rate, zero-down mortgages to qualified first-time homebuyers in rural areas. Fannie Mae is the Federal National Mortgage Association, which was established in 1938 to provide mortgage financing for low-income families. Ginnie Mae is the Government National Mortgage Association, which was established in 1968 to provided government-insured mortgages to low-to-moderate income families.
Ask the owner to hold the mortgage. Owner-financed mortgages are typically short-term until you can qualify on your own. Sometimes you can negotiate a rent-to-own lease where a portion of your rental payments is applied toward your down payment.
Be aware of your credit history before you apply for a loan. There may be errors on your credit report that can easily be corrected and raise your credit score. Go online to AnnualCreditReport.com to obtain your free credit report.
Check with the Better Business Bureau before choosing a lender. There are many mortgage scams out there, so do your homework—get educated on mortgage products and ask for sound advice before signing on the dotted line.
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