Mortgage - Home Mortgage

Credit
Home
Interest
Mortgage Rate
Refinance
Poor Credit Home Mortgage

There are number of things that a person who has poor credit can do to increase their chances of qualifying for a mortgage. There are also steps that an individual with poor credit can do to get a better interest rate and terms on their home mortgage.

The first step that a person with poor credit needs to do is to get a copy of their credit report so they can see what is on their credit report. A person should do this because many credit reports contain inaccurate and even false information that can damage your credit rating.

If a person spots inaccurate data on their credit report they can ask the credit bureaus to remove it. Removing negative information can cause a credit score to go up and increase a person’s chances of qualifying for a mortgage.

An individual can request a copy of their credit report by going to the web sites of the three major credit bureaus; Experian, Equifax and Trans Union. These companies are obligated to provide every consumer with a credit report by law.

How Poor Credit Affects Your Mortgage

Poor credit can decrease your chances of qualifying for a mortgage and increase the costs of your mortgage. Lenders are less likely to issue a mortgage to a person with poor credit because they consider people with poor credit to have a higher risk of foreclosure.

Since persons with poor credit are considered higher risks, lenders will charge them higher interest rates on mortgages. The interest rate determines how much you will pay for your mortgage and what your mortgage payments will be.

This means that a person with poor credit could end up paying higher mortgage payments. It also means that a person will have to come up with a higher down payment.

A Down Payment Can Help

Making a large down payment can get lenders to overlook poor credit and make it easier to get a mortgage. A large down payment will also decrease the cost of a mortgage because you won’t need private mortgage insurance.

Those who can’t come up with a down payment equal to 20% of the mortgage principal will be required to purchase mortgage insurance. Mortgage insurance will cover the lender’s costs if they have to foreclose on the home. If a person comes up with a down payment of at least 20% the lender will forgo mortgage insurance.

Making a large down payment can also get the lender to lower the interest rate. It can also convince a mortgage provider to overlook a poor credit score.

Avoid Poor Credit

The best way to avoid the problems associated with poor credit is to avoid poor credit in the first place. This means you should pay your bills on time and not incur debts that you can not pay. A good way to do this is to reduce your credit card use while paying off your credit card balances.

Another excellent way to improve your credit is to start saving at least 10% of your income. This will force you to reduce your spending and encourage you to live within your means. You can use the money you save as a down payment on a home.

Poor credit doesn’t have to stop you from qualifying for a mortgage and buying a home.