If you’re currently considering purchasing a home, then we’re sure you’ll already be aware of how long and length the process can be.
Amongst figuring out your budget and shortlisting some of your favorite housing listings, there’s one thing that simply can’t be overlooked – and that’s the mortgage application process!
When it comes down to deciding whether or not a lender will provide a mortgage loan, your credit score will play a very large role in determining whether or not the lender in question feels that you are an appropriate candidate to be able to repay the loan that they might give.
Generally speaking, most lenders today consider credit scores of 740 or higher to be in the “good” spectrum, which leaves many people with credit scores that fall short of that figure wondering whether or not they’re going to be able to qualify for a home loan.
If you’re currently stuck in this predicament, then the good news is that any credit score can, in theory, qualify for a home loan with a lender. Although, it’s important to keep in mind that lower scores can sometimes make the process a little less smooth sailing than you might like.
Needless to say, it is possible to qualify for a loan with a 550 credit score (and potentially even less than that), and this article is going to talk you through how to do that, as well as some additional tips to help potentially boost your score and appear more appealing to lenders.
So, whenever you’re ready, grab a pen and paper – and just read on!
While the FICO credit score of 550 is considered to be below the average credit score, it can make getting a home loan from a lender a little trickier to do.
However, as we’ve already touched upon above, it is absolutely possible to get a home loan if you have a credit score that falls in the 550 range in some instances.
These include having a high-paying, stable job, as well as being able to demonstrate good money management skills.
Before we go any further in this article, though, it is important to keep in mind that many lenders will likely opt out of doing business with borrowers applying with scores that fall in the FICO Very Poor range.
If you experience this along your home buying journey, try your best not to become discouraged, because there are a variety of different home loan lenders out there that will take into account a variety of factors when determining whether or not you qualify for a loan, such as a stable, high salary job.
Life can be unpredictable sometimes, and while unexpected circumstances might throw an unwanted spanner in the works, it doesn’t mean that you should throw in the towel on your home buying journey because it’s by no means impossible to get a home loan!
Below, you’ll find a breakdown of some of the best ways you can boost your chances of getting accepted by a lender for a home loan. Let’s take a look at them:
Make sure that you give yourself options
First things first, if you’re currently in the market for a home and have a 550 credit score, we strongly recommend that you widen your horizons and keep an open mind when it comes to lenders.
While you may have your eyes set on one lender, in particular, you’ll have a much greater chance of getting accepted for a home loan if you shortlist several options that you are open to.
Besides helping you have a higher chance of getting approved, you’ll also be in a much better position to get the very best interest rates, as well as an affordable closing cost fee, too!
Consider a larger down payment amount
One surefire way of instantly appearing more attractive to a lender is by offering them a considerably large down payment.
If it’s within your means to do so, investing a large sum of your own money is a green light in the eyes of lenders, as they tend to follow the idea that if a borrower is willing to invest a large amount of their own money, there will be a much lower chance of a missed mortgage payment.
Get your documents in order
Besides keeping your options open and considering a bigger down payment, another great way that you can increase your chances of getting approved for a home loan is by making sure that you have gathered all of your important documents to present to your lenders.
These documents can include income tax returns from the last two years, recent bank statements, credit-card bills, and anything else you feel are appropriate.
By being able to prove with your documents that you are able to regularly make repayments, then lenders will potentially view you as a suitable borrower for them.
Ask for a statement from your employer
As we’re sure you might already be aware, lenders usually tend to see potential borrowers who have worked at the same company (or even the same industry) for a period of two years or longer more favorably than those who haven’t.
So, if you have a shiny work record that reflects this, then demonstrating this with a statement from your employers will give you a much better chance of getting that home loan.
Alongside all of the advice above that will help you qualify for a loan with your 550 score, we also recommend that you actively take steps to help increase your credit score.
One of the best ways that you can do this is to obtain a consistent, monthly FICO credit score report that will allow you to understand everything that is negatively and positively affecting your score.
By doing this, you will be in a much better position to be able to begin taking steps to increase your credit score gradually over time, as your credit score will provide you with tailored and detailed information that has been taken directly from your own credit history.
What’s more, most credit score reports will even come with tips, tricks, and advice on how to boost your credit – totally free of charge.