With housing prices as low as they have been in 5 years, now is a great time to purchase a home. Unfortunately, people with bad credit will have to deal with tight lending standards that make being approved for a mortgage quite difficult. Luckily, there are a few ways of improving your chances of getting bad credit mortgage acceptance.
Put in More Equity
Putting more equity into the purchase of your home is the first way that you could improve your chances of getting bad credit mortgage acceptance. By putting forth more equity in the form of a down payment, the bank will taken on a much lower risk of losing money on the loan. Because of this, the bank will be more likely to approve your loan and will maybe give you a lower rate.
Buy a Cheaper Home
Buying a cheaper home is the second way that you could improve your chances of getting bad credit mortgage acceptance. When you apply for a mortgage, banks are very concerned with your debt to income ratio. For people with bad credit, this ratio will often need to be below 25%. If your debt to income ratio is higher than this, you could improve your chances of approval by purchasing a cheaper home.
Find a Second Signor
Finding a second signor is the third way that you could improve your chances of getting bad credit mortgage acceptance. A second signor on your mortgage will take on full responsibility for payments in the event you default. Because of this, the bank will now have the second person’s repayment guarantee and the bank’s overall level of risk will decline dramatically.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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