The Mortgage Loan With Bad Credit 1. Get a credit report, and not the free kind! Your credit report reveals a lot about your credit history, some even incorrect. The free kind gives you all the information about your debt history, but a paid version includes a FICO score. The FICO score is the magic number that accounts for some 80-90% of the mortgage loan decision. The scores range from 350 (awful/terribad) to 950 (superduperawesome). If your score is 350-499, you’re better off moving home with mom, rather than getting a mortgage loan. Even at 500-619, your credit score is so poor you can end up with $200,000 extra interest paid. Knowing your credit score will allow you to visit lender websites and see what you’ll qualify for in terms of their interest rates. Most lenders have this information prominently displayed (and most of the time it’s a scary thought to get a home loan with 20% interest rates). 2. Review your credit report for errors. If you find erroneous entries, follow the instructions with the reporting agency to dispute the transaction. Every entry affects your credit in a different way. Removing even one bad credit entry can raise your credit score 50 points (lowering the bad credit interest offering by as much as .05%, which can be $50,000 in interest). 3. Configure you debt to income ratio. Excluding utilities, create a ratio of your total monthly debt divided by your total gross monthly income. If this figure is above 36%, you’re in the nono area of credit risks. Ideally you want this score to be around 28%. Pay off and close low limit credit cards, wait to apply for a mortgage loan until you have a chance to reduce your debt to income ratio. 4. Learn about the different types of loans and which are beneficial in your situation. Check into the terms “ARM” “FIXED INTEREST RATES” and other terminology. There are literally hundreds of ways a mortgage loan can work and sometimes getting a bad credit mortgage loan will be approved with only fixed or ARM rates. Each lender has their own standards. Understanding how to get a mortgage loan with bad credit will, I hope, make you consider repairing your credit before the application process begins. Repairing credit is fairly easy and very productive. A year of secured card payments may save you thousands of dollars, as will reducing your debt to income ratio.
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