How to find bad-credit-friendly mortgage lenders
Not all lenders are created equal, especially when it comes to working with bad credit. Here are some tips to help you find the right one:
- Check with government-backed loan programs: As shown above, FHA, VA, and USDA loans often have more lenient credit requirements than conventional loans. If you qualify, these programs can open doors to better rates and lower down payments. Start by checking the official websites or speaking with approved lenders.
- Look for local credit unions and community banks: These institutions tend to be more flexible with lending criteria than big banks. They may offer special programs for first-time buyers or those with bad credit. It’s worth setting up an appointment to discuss your options.
- Partner with a mortgage broker: Brokers have access to multiple lenders and can help you find one that fits your financial situation. They know which lenders are more forgiving when it comes to bad credit. Just be sure to ask about any broker fees before proceeding.
To improve your chances of getting a loan…
As you can see, there are ways of entering into first-time homeownership without excellent credit — and “first-time homebuyer with bad credit” is far from an oxymoron. But if your credit isn’t in great shape and you’re looking to buy a home in the future, now is always a great time to start working to improve your credit.
Pay your bills on time, keep your balances as low as you can on credit cards, and pay off as much high-interest debt as possible. Be sure to get a copy of your credit report and dispute any issues that could ding your credit.
If you have inadequate credit—or no credit at all—Baroni suggests steps to start building it right now.
“You could get a secured credit card, which is like a debit card that acts like a credit card, and start building your credit — it’s your own money on a card,” he explains. “You could get a couple of those immediately.”
You might also switch, say, a boyfriend’s or girlfriend’s bill over to your name — or add yourself to it. “It’s just a couple of little things like this,” he says, “that can make a big difference toward establishing that credit.”
In short, even if you have bad credit, don’t count yourself out of the first-time homebuying experience — far from it. “A great agent has a network set up for just about everything, so go ahead and make the call,” Baroni suggests to would-be buyers.
Get connected with a mortgage professional to evaluate where you are — it’s easier than you might think: “People think of the process as very daunting, yet it’s very simple,” he says. “It’s just 15 minutes on the phone with a mortgage lender, not sitting in a bank all day.”
You might be ready to buy right now with your credit as it stands — or at least you’ll be setting yourself on the right path for the near future. “Figure out where you are,” he recommends, “so in a year or two from now, you’ll be ready to go to get pre-approved and make that purchase.”
A proven local real estate agent can connect you with mortgage lenders and help you navigate financing options. Partner with an agent today to secure your dream home.
Header Image Source: (Ingrid Martinussen / Unsplash)
