How To Get Approved For A Mortgage With Bad Credit
Updated September 12, 2018
Why Was I Turned Down For A Mortgage?
A mortgage is an important step to help finance your new home. Being denied for one can add to the stressful and time-consuming process of moving into your new home.
There are many reasons you may have been turned down by lenders, which include:
- Employment status or outstanding debts. Since lenders check to make sure you have a steady source of income for monthly payments, you may have been turned down due to your income or debts. For certain loans like the FHA mortgage, there is a requirement that you need at least two years of consistent employment.
- Mortgage fraud. This is a less common issue that takes place when a borrower gives false or exaggerated information to the lender about their financial situation.
- Inadequate savings. Because lenders look at your savings, find homes in price ranges that suit you and your budget.
- Your credit score. This is the most likely reason for being denied a mortgage.
What Is The Best Credit Score To Get A Mortgage?
Why does your credit score matter so much? For starters, a mortgage may be the largest loan you ever take and includes a down payment, insurance, and taxes. The better your credit score, the lower your interest rate is, which can save you thousands in the long run.
The minimum credit score to qualify for an FHA (Federal Housing Administration) loan isn't a set number and fluctuates depending on the state of the economy. When the economy is in a recession, it's normal for lenders to enforce more restrictions. During these times even an excellent credit score may not be enough to qualify you for a loan.
It can be difficult to qualify for a loan with a credit score of 580 or less, although there are personal loans available for those with bad credit. However, if your credit score is considered good or excellent, you will be able to take out a loan with low interest rates.
What Can I Do To Raise My Credit Score?
The difference between qualifying for a loan and being rejected might be a fraction of a percentage. Additionally, lenders are hesitant to give you a loan if you have no visible credit history. If you are new to credit, securing a credit card is one basic method to start building up your credit. However, be wary of opening too many new credit lines since that can actually decrease your score.
If you are looking for a small credit score improvement, the solution may be as simple as paying on time or paying off some credit cards and other debts before reapplying.
While paying off your debts, avoid closing your accounts. Even if you are spending the same amount, you are using a bigger portion of your available credit. Keeping your accounts open is more beneficial to your score.
Another option is to take out a credit builder loan. This is a loan secured by your personal funds and repaid monthly. You could also open another account that can be used as a credit line.
Although it may take 1 to 3 months to see any changes in your credit history, many lenders use a different reporting system called rapid rescore to find your new score only a couple of days after the changes are made.
One final and important task is to look for a credit monitoring service that gives you regular updates on your credit score.
If you want to improve your credit score further, you can turn to a credit repair service that can work on your behalf and dispute errors on your credit report such as identity fraud, incorrect payment statuses, and negative strikes for late payments.
At TheCreditReview, we value your trust.
TheCreditReview.com is a free online resource that provides valuable content and comparison features to visitors. To keep our resources 100% free for consumers, TheCreditReview.com attempts to partner with some of the companies listed on this page, and may receive marketing compensation in exchange for clicks and calls from our site. Such compensation can impact the location and order in which such companies appear on this page. All such location, order and company ratings are subject to change based on editorial decisions. TheCreditReview.com does not include all credit repair and reporting solutions available to customers in the market.
2018's Top Credit Repair Services
Need professional help repairing your credit report? Our experts have reviewed and ranked the top credit repair services of 2018, rating each based on reputation, BBB grades and overall results.
Latest Credit Content
- The Best Personal Loans For Bad Credit (Updated Sept 2018)
- The Ultimate Guide To DIY Credit Repair
- How To Fix Your Credit After Identity Theft
- The Comprehensive Guide to Credit Repair
- How To Buy A Car With Bad Credit
- The Comprehensive Guide To Loan Refinancing
- How To Get Approved For A Mortgage With Bad Credit
- Why You May Need Student Loan Refinancing
- What To Know About Your FICO Score
- Why You Should Pick A Credit Repair Company Over DIY Credit Repair
join our community
Stay updated with the latest credit services reviews, comparisons, deals and special offers.
Leave Your Credit Repair To The ExpertsSee The Top 5 Credit Repair Companies of 2018 Get Your Free Credit Consultation
Top Services of 2018