Will a Low Credit Score Make It Harder to Purchase a New Home in 2017
People with low credit score will prefer not to apply for a mortgage loan because they know that there is a high chance of getting rejected by the bank. Even though most banks will not approve mortgage loans for people with low credit scores, there are some banks that still willing to approve such loans at a higher interest rate. There is an increasing number of lenders that sets a lower requirement for credit scores. This is because many lenders are now aware of the difference in between those who are irresponsible and those who temporarily lost their jobs.
If your credit score drops as a result of a temporary retrenchment and you are now employed again, you should come up with a solid proof that you can make on time bill payment for example the receipt for your rent payment for at least 1 year. The mortgage loan that you apply should not have a monthly payment that is higher than the rent amount that you are currently paying every month. For example, if you pay $400 in rent every month, the mortgage loan should not have a monthly amount that is higher for example $600.
When evaluating your mortgage application, the lender will take a look at the factors that cause your credit score to drop. Some factors are less serious for example unpaid medical bills is less serious than neglecting to keep up with your car loan payment. You can increase the chance of getting approved by putting down a larger down payment for the mortgage. The more down payment you put, the lesser the amount you borrow which makes it easier for the loan to get approved. It is recommended that you put a down payment of more than 20%.
The FHA loan is easier to obtain compared to mortgage loans by the traditional banks. With a FHA loan, you only have to meet a low credit score requirement of 500. However, those with a credit score of below 580 must put a minimum down payment of 10% to be considered for the FHA loan. Many homeowners chose to take out a FHA loan because of the lower credit score requirement than traditional banks.
If you decide to obtain a mortgage loan, it is advised that you seek help from a mortgage broker as he know where to go to find the best deal. Shopping around for a mortgage loan on your own with a low credit score is hard as you will most likely get rejected or get charged with a high interest rate. You should have your spouse apply the mortgage if he has a better credit score. Otherwise, you should first improve your credit score before applying for the loan.