How to Get a Good Home Loan Rate When You Have Bad Credit
It’s never easy when you have to miss a loan payment. Everyone goes through a rough period, and it’s not always possible to meet your financial obligations.
But bad credit does not mean that you’ll never be able to borrow money again. In many cases, lenders will still let you borrow, albeit at a higher interest rate, to cover the risk in lending to you. In fact, many will need to borrow money (and, of course, pay it back on time) to improve their credit.
So, what do you need to do to get the best available rate, despite your bad credit?
Context is King
Although loans are a numbers game, there’s a reason that lenders use brokers and not computers to approve loans. They take things on a case-by-case basis and make a decision based on their knowledge and experience.
That’s good news for you because it means that you’ll have a chance to explain why you weren’t able to meet your financial obligations. By putting your situation in context, you can show that you’re still a reliable borrower, despite what the numbers say.
Lenders will look for signs of financial stress, such as a divorce or job loss, which tend to harm a person’s credit record. Using this information, a lender can not only see what went wrong but also how others have been able to turn their fortunes around.
How Can I Improve?
Just because you have bad credit, that doesn’t mean that you’ll never get better. The problem may have been out of your hands, but you can do something about the solution.
Here are some steps you can take to build back lender confidence.
- Don’t Borrow More Money – The fastest way to get out of a hole is to stop digging. As much as you’re able, don’t make more credit card charges and avoid borrowing money until you can get into a stable situation.
- Focus on Your Current Obligations – Make every effort to pay off the debts you currently have, starting with the smallest and building to the largest. If you can’t make a full payment, at least put something toward what you owe.
- Make a Small Loan – Okay, this might seem to undermine the first point, but they actually work in tandem. Sometimes, the best way to show that you’re reliable is by being reliable. A small, high-interest loan, that you can pay back quickly and constantly, will provide tangible evidence that your situation has changed.
Still Have Questions?
Borrowing with bad credit can be scary, but it’s not impossible. We at Mortgage House are here to help, so contact us today!