Having bad credit is often a sign that one made some bad financial decisions. While it’s possible to get a home loan in South Florida even if you have poor or bad credit, you’ll need to make some concessions in terms of the home price and the interest rate you accept. This means that your dream of having your dream house is still valid, though it won’t come easy. Unlike someone who has a perfect credit score, you’ll need to take some steps in order to be approved for a home loan. The following are the 7 steps for you to take:
Improve your Credit Score
The most obvious way of improving your odds of getting a home loan is to improve your credit score. Even though this takes a bit longer, a slight increase in your credit score can make a real difference. Make sure that your overall debt is paid on time. Once you demonstrate that you’ve improved your financial situation, you’ll improve your chances of getting approved for a home loan.
Fix Errors in Your Credit Report
At times, your credit score may be affected by erroneous entries. Obtain a copy of your credit score from relevant credit bureaus and check whether there’re errors in your report. In case of any errors, dispute them right away. Disputing errors can significantly boost your score almost immediately.
Consider Credit Repair
This is a step that you should take if you don’t have enough time to improve your credit score. There are various specialist credit repair agencies that can assist you with cleaning up your credit report. You can ask them to investigate your credit report and find out if there is a possibility for adverse entries in the report to be expunged.
Obtain FHA Approval
While FHA doesn’t necessarily lend out money, it acts as a form of insurance, providing a guarantee that it’ll pay the amount you owe the lender incase you fail to pay your loan. With the FHA approval, lenders see a reduced risk of lending to someone with a low score, which greatly improves your odds of obtaining a home loan.
Find a Co-Signer
In the event that you don’t get FHA approval, finding a co-signer is the next step to take. Find a family member or friend who’ll be willing to co-sign for your loan. Remember that this will put the co-signer on the hook for your debt. This means that your co-signer will be obligated to pay your debt in case you default.
Find a Specialist Lender
It’s advisable for you to consider specialist lenders that cater to low-credit borrowers. As you shop around, avoid applying with many lenders. This is because every application you make is recorded on your credit report, and many declines will have a negative impact on the report.
Make a Higher Down Payment
Making a fat down payment can go a long way in enabling you secure a home loan in South Florida. This will give your lender the assurance that they will get their money back somehow. Furthermore, a higher down payment means that you will not have to pay private mortgage insurance, which is usually required of those who put down below 20% of the home price.
It’s a relief to know that it’s still possible for you to get a home loan in South Florida even if you have poor or bad credit. When shopping for a loan, be on the look out for scams and explore a lender’s reputation before applying for a home loan with them.