A low credit score used to mean no loan options for borrowers. After the housing crisis everything tightened up and most lenders only approved borrowers with great credit and other qualifying factors.
Today it’s a lot easier to get qualified even with a low credit score. Loans today are much more forgiving, especially the options we have at Save Financial.
If you have a low credit score, here’s how to make sure you still get approved.
Put Money Down
A down payment offsets the risk of a low credit score. Loans always have a minimum down payment requirement, but if you can put down more than the minimum, it shows your desire to invest in the home.
When you have ‘skin in the game,’ you’re at a lower risk of defaulting on your loan and lenders will be more likely to approve your application even with low credit scores.
Minimize your Debts
Having a lot of ‘other debt’ won’t help your chances of getting approved with a low credit score. Try paying off any other debts or avoid applying for other loans until you have your mortgage in place.
Lenders calculate your debt-to-income ratio, which is a comparison of your monthly debts to your gross monthly income (income before taxes). The lower it is, the easier it is to get approved for a mortgage even if you don’t have the best credit.
Have Stable Employment
A stable employment history tells lenders you are likely to have employment for the foreseeable future and will be able to pay your mortgage loan.
Ideally, you should have a 2-year stable employment history, but anything longer than that can work in your favor even more.
Low Credit Scores Don’t Stop Lenders from Approving You
Your credit score is a snapshot of your financial life at that time. You could have improved your situation since then but your credit score might not have changed yet. That’s why our lenders work with borrowers with all types of credit.
They recognize that mistakes happen and that most people are capable of fixing the issue and doing better moving forward. Credit scores can take months or years to improve enough, but with enough proof that you’ve fixed the issues and can afford the mortgage beyond a reasonable doubt, your credit score might not matter.
If you have a low credit score, there are loans for you. At Save Financial, we work with many lenders that cater to borrowers with bad credit. We know that you are just as worthy of a mortgage as a borrower with good credit and with the right compensating factors, you can get a loan.
We just need to prove that you are a good risk by proving you’re willing to invest in the home (with a down payment) and that you kept your debts under control. Proving you are a low risk of default can land you the loan you need to buy your dream home today!