Are you looking to buy a home but worried your credit will hold you back? While it makes things more challenging, you can find a mortgage with low credit.
Read on to understand your credit score, mortgage rates, and how to secure a mortgage loan that works for you.
Understanding Your Credit Score
To understand your credit score, the first thing you should do is get a copy of your credit report. Equifax, Trans Union, and Experian are the three major credit reporting agencies. You can receive a free copy of your credit report from each company annually.
Once you have the reports, take a look at your credit, or FICO, score. It will range between 300 and 800. If your score falls below 670, you might have a harder time finding a mortgage loan.
Banks That Offer a Mortgage With Low Credit
Even with low credit, you still have mortgage loan options. Several mortgage companies help people with low credit through the home buying process.
Often times the home mortgage rates these companies offer is higher than the standard rate. This is because if you have low credit you are a bigger risk to the bank.
Current home mortgage rates are based on a mix of the economy and your personal credit.
If you are curious about mortgage rates and whether you will qualify for a mortgage loan, there are several online tools that can help with mortgage rates and costs.
Once you find a list of companies that can help, call around and ask about their pre-approval process. You may need to provide some financial statements such as proof of income for this process.
Once you are pre-approved, the bank will tell you how much you qualify to borrow and what your interest rate will be for a given period of time. They even calculate your monthly payments.
This information will help you decide which mortgage company is the best fit for you.
Find a Co-Signer
If you are not happy with the home mortgage rates you are offered, you still have a few choices. First, see if you can find someone with good credit to co-sign on the mortgage loan with you.
This person will have their credit checked by the bank and will be on the loan with you. If you default on your mortgage payments, they are responsible. Adding a co-signer to a loan takes some risk away from the bank, and results in you qualifying for a better interest rate.
If you can not find a co-signer, it is not too late to improve your credit. Start by paying down any high balances, especially accounts that are over or right at the credit limit. If you can pay down some balances and make timely payments, your credit score will improve over time.
Now that you have learned a little more about shopping for a mortgage with low credit, it is time to get started on the path to homeownership today!