If you have bad credit, it is impossible to get a mortgage loan. Fortunately, options are available for those with less-than-ideal credit scores, like finding the best loan for self employed. This post discusses how to get a mortgage even if you have bad credit.
Check Your Credit Score and Report
The first step in getting a mortgage loan with bad credit is to check your credit score and report. Obtain copies of your report from the three major bureaus, Experian, TransUnion, and Equifax. Look over the reports carefully and dispute any errors or negative items that may be dragging down your score. This will help you get an accurate picture of your credit before applying for a loan.
Understanding how lenders view your credit will also help you know what type of loans you should apply for and which ones might be out of reach at this time. Understanding your financial situation will also make it easier to find lenders that are willing to provide loans to people with bad credit.
Get Pre-Approved for a Mortgage Loan
Once you have checked your credit score and report, it is time to get pre-approved for a loan. This will give you an idea of what kind of mortgage loan you can qualify for and how much money you can borrow. The lender will review your credit history, income, and current financial situation to determine how much you can borrow.
Consider Government Programs
The U.S. government offers several programs designed specifically for those with bad credit who want to purchase a home. These programs include FHA loans, VA loans, USDA loans, and jumbo loans. Each program has different qualification requirements, so it’s important to do your research before applying for one of these loans. They all offer different benefits depending on your individual needs and financial circumstances.
Look For Specialty Lenders
Some specialty lenders offer mortgages to borrowers with bad credit scores or other unique financial situations, such as non-traditional employment or self-employment income documentation issues often associated with the gig economy or independent contractors.
These lenders may require higher interest rates, but they can provide solutions when other lenders cannot due to their deep understanding of the nuances of lending in these specific cases. Traditional lenders may be unable to accommodate due to rigid guidelines and regulations set forth by banks and government agencies like Fannie Mae and Freddie Mac.
Improve Your Credit Score
Try to improve your credit score before applying for a mortgage loan. Paying down existing debt and making on-time payments on all bills can improve your overall credit score over time, which could lead to better terms on potential mortgages. Additionally, try to open only a few new lines of credit or close any existing accounts, as these actions could have a negative impact on your score in the short term.
Conclusion
The best loan for self employed understands that getting a mortgage loan with bad credit is challenging, but it is possible if you know where to look. Start by checking your credit score and report. Then consider government programs such as FHA loans or VA loans as well as specialty lenders that understand unique financial situations such as those faced by self-employed individuals or independent contractors who lack traditional employment income documentation needed by conventional lenders like banks or Fannie Mae & Freddie Mac backed entities. With some research into what type of loan best fits your situation, you can find the right lender that will work hard on getting you approved so you can buy the home of your dreams.
