subject: Poor Credit Home Loans - 6 Steps to Easily Getting Approved for Poor Credit Home Loans [print this page] Poor Credit Home Loans - 6 Steps to Easily Getting Approved for Poor Credit Home Loans
Getting mortgage approval has been made more difficult in the wake of the financial crisis. It's even more difficult to get a mortgage loan if you have poor credit because lenders want to be guaranteed that you'll pay back the loan.
It's really not that difficult to improve your credit score and get approved for a poor credit mortgage. I've outlined 6 steps that are easy to follow and will change the way mortgage lenders look at you.
Step 1. Frequently check your credit report
Lenders look at 3 main areas when deciding to lend you money
Steady Income
A Down Payment
Solid credit history
By regularly checking your credit report, you'll know if there are any mistakes that are hurting your credit score. You may think that this step is trivial, however, it's estimated that up to 40% of all credit reports contain some type of errors, some of which may negatively affect your credit score.
When checking your credit report, you'll need to pull all 3 reports because you don't know which ones the bank will reference, so it's better to err on the side of caution.
Step 2. Dispute inaccurate Information
As mentioned before, any misinformation on your credit report can hurt your credit score and increase your chances of your poor credit mortgageapplication being denied. You can rid your credit report of inaccurate information by disputing it with the credit bureau.
If you have proof of the mistake, provide it with a copy of the credit report when you make your application to the bureau. Make sure that you send your request via certified mail with a receive request receipt attached so that you have proof the bureau received your dispute.
Step 3: Pay Off Delinquent Accounts
Accounts that are late, charged off, in collections will hurt your chances of being approved for a mortgage; you'll need to prove to the lenders that you're responsible and taking action to rectify the situation.
You lenders are more than willing to work with you to pay down these accounts, and that's really what the banks and lenders want to see.
Step 4. Timely Payments
You'll need to establish a pattern of timely debt payments before getting approved for a mortgage with a decent interest rate. If you have just paid off some delinquent payments, wait about 6 months before applying for a mortgage, because the older the delinquency, the better your credit looks.
Step 5. Reduce your debt to income ratio
During the mortgage application process, your underwriter will ask you about your ability to make your payments on time based on the current level of debt you have.
Try your best to bring your monthly debt payments to around 15% of your income. If you need to, try consolidating all your debts together with a debt consolidation loan. This should lower your interest rate and make your debt payments more manageable.
Step 6. Your FICO Score
Aside from getting your credit report, you'll also need to check your FICO, or credit score to see what your number is. Your credit score is a 3 digit number from 300-850 and can be ordered from www.myFICO.com.
Your FICO will need to be at least 720 to get a competitive interest rate on your loan. If your score is below 720, read through the report analysis that came with your score to see what's bringing it down.
Be advised that Experain no longer allows the purchase of a FICO score, they now use what's called the Vantage score so if you want to get an idea of what your Experain credit score is, purchase the Vantage score through them and then multiply your result by about 0.86 and you'll be in the ball park.
I want to be real with you. It is very unlikely that you will significantly improve your credit rating in thirty days as some people promise. However, everyone's situation is different. In some cases you might only need minor tweaking and others will need more work.
Either way if you follow the 6 steps outlined above, your credit score will increase and you'll look more favorable to your lenders.
Watch over my shoulder as I teach you how to repair your credit
