3 Key Things to Do to Get a Low Credit Home Loan from Mortgage Lender
Do you want to apply for a home loan program? Whether you want to apply for an FHA loan, a VA loan or a conventional loan to finance your home, your credit score is one of the crucial things that your lender will check before approving your loan application. So, having a good credit score is a must for getting approval early.
But that does not mean you can’t get a home loan with bad credit. You can opt for low credit score mortgage lenders in Houston, Tx. Do you know what you need to do for this? Here are these –
Lower your DTI
Do you want to get a home loan with a bad credit score? Then, one of the crucial things that you can do is to lower your debt-to-income ratio or DTI. It will help the lender to know how much of your income goes to monthly debt obligations, including credit card, car loan payments, and many more. The lower your DTI, the better it will be, as you will have more income available to handle a mortgage payment.
There are two ways to lower your DTI, either increasing your income or by asking off some debt or by both. In general, mortgage lenders ask for a DTI of 43 percent or less than that, but 36 percent is considered to be ideal. So, if your credit score is not good enough, a low DTI ratio can make you a more attractive borrower.
Hefty down payment
As a low credit score is a sign that you are a risky borrower to the lender, they would like to think twice before approving your home loan application. You can lower such possibility by coming with a hefty don payment. The bigger your down payment amount, the better it would be for you. When you offer a bigger down payment, you will need to borrow less money for the home purchase and have more equity in the home. It will help you to establish you as a more attractive borrower.
Look for a co-signer
Do you have a family member or a close friend, who has a good credit score? Then, ask him or her to co-sign the home loan. He or she can allow you to use his or her credit score to get your home loan approved. When you come up with a co-signer with a good credit score, the mortgage lender will trust you and approve your loan application. But you have to be careful while taking this decision. Because, though the loan is in your name, your co-signer will equally be responsible to make the payment. Therefore, if you missed a mortgage payment, his or her credit would take a hit.
Bad credit can’t alone prevent you from getting a loan from a mortgage lender. When you lower your DTI, come with a hefty down payment, and look for a co-signer, you can easily get approval for a home loan program. So, apply for a home loan as early as possible.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.