There comes a time in every tenant’s life when he is tired of writing off checks to the landlord every month. You’d rather purchase a house and build equity on a monthly basis mortgage payment. It all comes to a halt when you have a bad credit report. But, fret not. If you have a bad credit, it is still possible to buy a house and for the same, you need to follow these steps.
- Determine your credit score
Have a quick look at your credit score. You can know your FICO credit score from various sources like banks and credit card companies. Always remember that you have three credit scores: in Equifax, Experian, and TransUnion. It is always considered a better idea to know all three of them.
- Look out for the errors in your credit report
Your credit score is determined from the credit data in your credit report. Imagine it is a history of how you have managed your money. There are many chances of errors in your credit report. If there are any, they could harm your score substantially and prevent you from getting a bad credit mortgage. Always get a free copy credit of your credit report on an annual basis from each credit report company. Ensure that the information is accurate and updated. If there are any errors, you can dispute them with the concerned credit bureaus.
- Opt for a larger down payment
Sometimes lenders are willing to give away the loan when you opt for a larger down payment. Today, it is quite possible to have a mortgage of down payments of 3 percent or lower. But if you have bad credit, opting for a larger down payment can make a huge difference between an approval and a rejection. This is because the bad credit is charged with higher interest rates. When you put the money upfront, your lender becomes willing to take a risk on the home loan and the lender believes that you are least likely to default because of the same. If you opt for a down payment of 20 percent or higher on the mortgage, then it will be more favorable for you to earn that loan approval. But if you cannot, it means that you won’t be able to get approval by any chance because of your bad credit status.