Finding a mortgage loan with a bad credit rating can be an absolute nightmare: Driving from broker to broker, bank to bank, getting turned down every time, all the while your credit keeps dropping with every credit check. Fortunately, this painful process can be avoided with just a few simple tips.
Tip #1 – Find a Specialist
There are banks and brokers, and then there are bad credit specialists. These specialists usually don’t take on the loans themselves, and instead forward your loan to dozens of companies that might be interested in financing your home.
In other words, instead of applying to just one bank, bad credit specialists will search out and find a mortgage loan that you qualify for.
Keep in mind that this service will cost you – Upfront in closing costs or in extra interest. The middle man has to get paid, after all.
Tip #2 – Learn to Improve Your Credit
Learn to improve your credit three to nine months before purchasing a home. There are several tricks you can use to bump up your score, without actually changing your financial situation.
One example is to balance your credit cards so they’re all about evenly used, instead of one being nearly maxed and another near zero. Ideally, your credit cards should all be under 30%. A large part of your credit score comes from your highest credit card utilization rate: In other words, evening out your credit cards can have a huge impact on your score.
This is just one example of a trick to improve your credit. Learn how the credit system works and actively work on it for three to nine months before applying. Doing this will save you thousands of dollars in the long run, and may make the difference between getting approved or denied.
Tip #3 – Compare Your Loan
Bad credit borrowers are often “prime targets” for high interest rate loans. While it’s true that with bad credit you’ll be paying more and often need more money down, that shouldn’t keep you from shopping around.
Don’t just settle for the first loan you get approved for. Instead, compare your loan options to find the one that suits you best.
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