Obtaining a mortgage despite debt and credit problems

Obtaining a mortgage despite debt and credit problems

In order to minimize the risk of foreclosure, a mortgage lender will always examine your credit history and your overall financial situation. Lenders want to understand how much debt you currently owe, what kind of income you have, and other factors as well. How do you overcome problems in your credit history if you are trying to obtain a mortgage?

The first thing you can do is to not give up hope. Instead, become more proactive and contact your potential lender in order to explain the problems in your credit history. You can try to explain the particular circumstances that led to your poor credit score such as sudden unemployment or medical conditions. You can also look for lenders who may be more flexible and are more willing to consider your case despite your imperfect past. In addition, a mortgage broker can be instrumental in finding a lender who is ideal given your financial circumstances.

You can also consider negotiating with the seller directly, as many do not care so much about credit scores. You may have more success in obtaining seller financing, especially if your income and debt levels have improved despite your previous financial problems.

There is always the possibility that your credit report contains errors, and these could be contributing toward a lower score and rejections on your mortgage applications. Unfortunately, you are usually considered guilty until you can prove your innocence in these matters. The first thing you should do is obtain a copy of your credit report and look through all the information carefully.

Credit bureaus are required to respond to your inquiries within one month. Be patient, as you may have to exhibit some determination and persistence in order to get creditors to correct their errors on your credit report. You can always file an official statement of contention which will show up on your record and help explain your side of the story to potential lenders. However, the best option is clearly to have these mistakes removed from the report.

Ultimately, many prospective homebuyers will have legitimate problems on their credit history, and there may not be much they can do about it in the immediate future. If you fall into this category, you may simply need to be patient for a couple of years and pay your bills on time in order to rectify your credit deficiencies. Your credit score will gradually improve, and you can also use this time to increase your savings for a down payment. This may be a better option than accepting a loan with huge interest rates, assuming you can currently qualify for any loan at all.

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