How To Apply For A Home Loan With Poor Credit

If you are wondering how to apply for a home loan with poor credit, it is possible. Poor credit can make owning a home seem like an impossible goal, but getting a home loan doesn’t have to be a frustrating or disappointing experience-even for those with poor credit. Although your credit rating does come into play when you apply for a home loan, it isn’t the only factor that mortgage lenders consider when reviewing applications. If you can present the lender with solid evidence that you will repay the mortgage, having poor credit may have less of an impact on the home loan application process than you originally anticipated.

1. Find out just how derogatory your poor credit is. The Fair Credit Reporting Act allows you to review one free copy of your credit report each year. The Federal Trade Commission recommends that you request your annual free credit report from AnnualCreditReport.com, the only government-approved website for free credit reports.
2. Get your FICO scores before you apply for a home loan. Although various types of credit scores exist, FICO scores are the credit scores that mortgage lenders review. Knowing what’s on your credit report helps prepare you for what your mortgage lender will see, but it won’t tell you your FICO score. Experian doesn’t provide FICO scores to consumers, but Equifax and TransUnion do. Pull your FICO scores before applying for a home loan to find out just how poor your poor credit is.
3. Consider applying for an FHA home loan. FHA home loans carry less stringent credit requirements than conventional home loans. For an individual with poor credit, an FHA home loan can make the mortgage loan application process much less stressful. If you have a history of military service, you may also qualify for a VA home loan. VA home loans are also easier to obtain than conventional loans for consumers with poor credit.
4. Prepare to make a significant down payment toward your home loan if you have poor credit. The greater your down payment, the more some mortgage lenders are willing to overlook a poor credit score to help you buy the home of your dreams.
5. Ask a friend or family member with good credit to co-sign with you on your home loan. A mortgage lender can hold a co-signer legally responsible for paying the mortgage loan in the event that you default on your obligations. This makes obtaining a home loan much easier if your poor credit is all that stands between you and a home loan.