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Mortgages are tough to get approved for these days. Ever since the major housing and mortgage crisis a decade ago, lenders have become incredibly stringent with their lending criteria. No longer are borrowers able to take out exorbitant loan amounts with minimal documentation like they did back when the mortgage crisis was just starting to grow.

These days, it can be tough to get approved for a mortgage, especially with bad credit. Of course, having a healthy credit score makes it a lot easier to get approved for a home loan, not to mention the fact that interest rates for high-score borrowers tend to be lower. But does that mean it’s impossible to get a mortgage with bad credit? Absolutely not.

In fact, I was able to secure a mortgage even with a sub-par credit score of 590. With some well thought-out tactics, I managed to secure a home loan to finance a home purchase, despite my less-than-stellar credit score. Here are a few steps you should take to maximize the odds of getting approved for a mortgage, regardless of what your credit score happens to be.

1. Check Your Credit Score

Before you apply for a mortgage, find out exactly what your credit score is. You could be sorely disappointed when you apply for a mortgage only to find out that your credit score is a lot lower than what you thought it was. Only when you know what your score is should you take the necessary steps towards securing a mortgage.

You’re allowed to check your credit score for free from one of the three credit reporting agencies. Once you pull your report, go through it carefully. Look for areas that require improvement, such as making timely bill payments and refraining from opening too many credit accounts in a short period of time.

You should also look for mistakes in the report that could be unfairly pulling your score down. If you notice any errors, be sure to dispute them with the credit bureaus. An investigation into any mistakes will be conducted until they’ve been rectified, which should help improve the credit score.

2. Work With a Lender That Specializes in Bad Credit Mortgages

Most traditional banks tend to frown upon borrowers with bad credit scores when it comes to mortgages. Conventional lenders don’t like to do business with bad credit borrowers simply because the risk is too high for them. Borrowers with low credit scores are considered to be more likely to default on their home loans, which puts lenders in a precarious position.

Rather than contacting a traditional bank for a home loan, you’d be better often searching for a lender that specifically deals with bad credit mortgages. In fact, these lenders tend to work exclusively with subprime borrowers with low credit scores. While the mortgages that these lenders offer tend to come with higher interest rates, your chances of mortgage approval are a lot higher when you take this route.

3. Consider an FHA-Backed Mortgage

Conventional mortgages are typically out of reach for bad credit borrowers. Generally speaking, a traditional mortgage requires borrowers to meet stringent requirements, including having a high credit score.

Unfortunately, you don’t have that trait, which is why you should be looking at alternative mortgage products that you would be more likely to get approved for. One such loan product is an FHA-backed loan, which is guaranteed by the Federal Housing Administration (FHA). These mortgages are easier to get approved for because they don’t require a stellar credit score.

In fact, the minimum score requirement for these types of mortgages is as low as 500. Not only that, you don’t have to put as much of a down payment as you would with a conventional mortgage.

4. Get Pre-Approved For a Mortgage

Once you’ve decided which home loan product is best suited for you, get pre-approved. After you’ve found a bad credit lender that is willing to work with you, request a pre-approval letter. The lender will then check your credit score and verify your income and assets to pre-approve you for a mortgage. Having this letter in hand will put you one step closer to getting approved, and will help you be perceived more favorably in the eyes of sellers.

5. Request Seller Financing

Instead of getting a bad credit mortgage from a lender, you might actually be able to finance the home with the help of the seller. “Seller financing” is a unique type of mortgage that’s provided by the seller. Typically, the buyer will provide a down payment to the seller, then make regular payments (like mortgage payments) every month over a specified length of time at a specific interest rate until the mortgage has been totally paid off.

Seller financing arrangements are usually only on a short-term basis with a balloon payment that’s due when the contract expires. Not all sellers are willing or even able to provide such an arrangement, but it doesn’t hurt to ask. That said, it’s important to look deeper into financing arrangements such as these before you lock into one.

6. Make a Larger Down Payment

You might have bad credit, but if you can come up with a decent-sized down payment, you stand a better chance of getting approved. Bad credit lenders focus more on things such as your most recent payment history, your finances, and your net income rather than placing so much weight on your credit score. The more you can prove that your income is more than enough to help you make your mortgage payments, the more favorably lenders will view you.

A large down payment also lowers your loan-to-value ratio (LTV), which is a measure of your loan amount compared to the value of the home you buy. The closer the loan amount is to the market value of the property, the riskier the loan is considered to be. A higher down payment amount can effectively reduce your LTV, which lenders like to see.

Besides, with a larger down payment, you won’t have to borrow as much. That means your loan payments will be lower and you won’t have as much of a debt burden to worry about every month.

7. Get a Co-Signer

If you’ve got someone in your family who’s got good credit, is financially responsible, and is willing to help you out, consider adding them as a co-signer on your mortgage. A co-signer’s credit and income will be considered in assessing how much you will be able to borrow. Just make sure that you are responsible with your mortgage payments, as your co-signer will be on the hook if you default.

8. Make Improving Credit Score a Priority

While you’re looking to get approved for a mortgage, you should be taking measures to improve your credit score at the same time. Some steps you can take include the following:

Stay on top of your debt payments;

Keep your credit balances low;

Pay down your debt;

Keep old, unused credit cards open as a short-term means of increasing your score;

Don’t open several new credit cards in a short time period.

The better your credit score, the higher the odds of getting approved for a conventional loan in the future, which should be your ultimate goal.

The Bottom Line

Just because you have bad credit doesn’t mean your chances of buying a home and getting a mortgage are quashed. There are still options available specifically for borrowers with a poor credit rating. While it might not be a simple task, it’s certainly not out of the question. Work with a bad credit lender and take measures to boost your credit score. Taking the right steps can help you secure a mortgage and realize your dreams of homeownership.

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