Boston Real Estate for Sale

Tips For Getting a Mortgage With Bad Credit

Are you interested in buying a downtown Boston condo for the first time but don’t have the best credit? Anyone can find themselves in a bad financial situation. Whether this is through their own mistakes or from a situation out of their control, it can lead to credit difficulties. Having a poor credit history will make getting approved for a mortgage more difficult. But there’s hope.

Even though you may have more problems convincing a lender that you are an acceptable risk, it is still possible to buy a Boston condo with bad credit, 

In this blog post, we’ll help you improve your credit

First, find out what your credit score is today.

Your credit information is reported on three major credit bureaus including, Equifax, Experian, and Transunion. These agencies supply information to lenders who will be writing loans for those who are buying Boston real estate.

Apply for an FHA Loan

To be eligible for a bad credit loan from the Federal Housing Administration, you need a credit score of 500, which will require a 10 percent down payment. To qualify for a lower down payment of 3.5 percent, you need a score of 580.

You need to wait a year after a chapter 13 bankruptcy and two years for chapter 7. There is a waiting period of 3 years for foreclosures.

Apply for a USDA Backed Mortgage

If you are on a low-income, a loan from the USDA with a score of 640 or even as low as 581, in some circumstances, will allow you to buy a home. The wait time after an adverse credit event is similar to the FHA.

Improving Your Chances of Getting a Bad Credit Loan

There are things you can do to improve your chances of obtaining a mortgage for the Beacon Hill or seaport condo you want, even if you have terrible credit.

Increasing Your Down Payment

If you can do it, saving a more considerable amount of money for the down payment will increase your likelihood of being approved by a lender. While this may seem complicated, cutting back on your expenses and saving money into a bank account for the sole purpose, will improve your situation. 

Many people do not realize they can also get a down payment gift from a relative. Unfortunately, getting a down payment gift is not heavily promoted by lenders or real estate agents. It really should be mentioned as an option far more often.

Checking Your Credit Reports

If you haven’t checked your credit reports, you should. There could be things in the reports which aren’t correct and are doing damage to your score. The credit bureaus hold information on you, and if this is incorrect or out of date, it could harm how you look to lenders. Getting your credit report is easy and is free once a year from the three reporting agencies.

If something is wrong in your report, you can issue a dispute to the bureau. Once the problem is removed, your score should improve.

Credit Counselors or Credit Karma Can Help

While you might not know what to do to improve your score, even after reading your credit reports, a counselor will. They can look through the details of your financial history to turn around the direction your score has been heading. Another excellent option is using Credit Karma. One of the most beneficial features of Credit Karma when buying a home is to show you exactly how to build your credit score.

They will actually show you exactly how your credit decisions will impact your score. For example, what would happen if you closed out one of your credit card accounts? People do things all the time that unknowingly will negatively impact their credit situation. Credit Karma shows you what not to do!

Cosigners Might Be an Option

A cosigner on your loan might help you get a mortgage if they have a better credit score. However, this is a significant risk for them. If you miss any payments, their credit score will be damaged, and they will ultimately be responsible for the loan. Parents quite often will co-sign a child’s mortgage.

Boston Real Estate for sale and the Bottom Line

Though finding a mortgage lender willing to help is more difficult when you have terrible credit, it is far from impossible. The worse the situation with your credit is, the higher the interest costs you can expect.

If you can take action to improve your situation, a mortgage application will stand a better chance of approval, and you can reduce your monthly payments as well.

Hopefully, you have found this information on getting a mortgage with bad credit to be helpful.

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