If you want to get a mortgage loan but you have bad credit, you may wonder how that will impact the loan process. Here is some information that you should know about bad credit and mortgage loans.
How Does Bad Credit Affect Your Ability to Get a Mortgage Loan?
If you have bad credit, you may find it challenging to find a lender who will approve you for a loan. This is because it is a risk to loan someone money who has a history of not paying their bills or not paying them on time.
If you are able to find a lender who will lend you the money for a mortgage loan, you will likely find that the amount you are approved for is lower than someone with equal income and a good credit score. You will likely have to put down a larger down payment. And you will find that you are paying a higher interest rate than what you would otherwise qualify for with good credit.
Is it Better to Bring Your Credit Score Up Before Getting a Mortgage?
Most experts recommend that you bring your credit score up before applying for a mortgage loan. This is because you can secure a better interest rate with better credit. If you think that you will be applying for a mortgage loan anytime in the next 12 to 24 months, now is a great time to pull your credit report. Give it a good look and start working on any issues you see there.
Ways You Can Bring Your Credit Score Up
There are a few things you can do to bring your score up. However, these things take time. As such, it is important to pull your report at least a year before you intend on applying for a loan. Here are a few of the things you can do to improve your credit score:
Dispute any information that you doesn’t belong to you or is incorrect on your report.
Pay your bills on time
Pay down your credit cards so you are using no more than 1/3 of your total credit limit.
Pay off your delinquent accounts.