Four Things To Know About Getting A Home Loan With Bad Credit
If you have poor credit, it can be difficult to obtain a home loan. However, that does not mean that it is impossible. There are ways to receive a decent home loan even with a credit score that is lower than 700. Here's what to know about getting a home loan with bad credit:
- There's Usually a Cut-Off: Most lenders will have a cut-off that indicates where you credit score needs to be in order to obtain a home loan. This is typically between 620-580. Anything lower than that will guarantee that you are denied when you apply. Determine where your credit score lies to ensure that you know whether or not you need to increase it in order to start meeting with lenders.
- Debt to Income Ratio Restrictions: On top of your credit score having a cut-off, you also have to have a decent debt to income ratio. This is usually between 40 to 50 percent. Anything more than that will likely get you denied for the loan. In order to determine what your debt to income ratio is like, you will want to add up your living expenses and divide that by your gross monthly income.
- Start With your Bank: The best place to start your home loan application would be at the bank you currently have a relationship with. You will have the advantage of your history with the bank, which can ensure that you are more likely to receive a great home loan even with bad credit. Be sure that you bring along your credit score and debt to income ratio with you to get the process started quickly.
- Choose the Best Terms: After meeting with your bank, you will want to compare what they offer you with a couple of other lenders in the area. In the end, you will want to choose the lender that offers the best terms. You will want to consider the length of the loan. A shorter length means you are paying more each month, but will be paying off the house more quickly. You will also want to compare interest rates since a lower interest rate means you are paying less on the house. Consider whether or not the lender will increase interest rates if you are late on a payment, as well. You will want to choose a company that keeps the interest rate the same if you can.
By knowing these things about getting a home loan with bad credit, you can see that it's not impossible and you can take charge in finding the best loan available to you. For more information, contact companies like MCS Bank.