What Do I Do When I Have Bad Credit and Want A Mortgage?

Refinance-Mortgage-Loan-With-Bad-Credit-1024x1024Securing a mortgage is one of the most challenging loans to obtain.

Your credit rating/credit score is a factor in the lender’s decision making process.

A lower score will have a substantial impact on not only the interest rate but the overall decision whether or not the lender will approve your application.

A high rate coupled with the nature of a mortgage (term/amortization) will cost you significantly more in interest charges.

It is important to do a little homework and preparation prior to applying for a mortgage.

Review your financial situation. Calculate your budget and what you can realistically afford, keeping in mind home ownership comes with additional expense that you may not currently be experiencing (repairs, taxes, upkeep, utilities, etc.). Lenders will have guidelines with respect to an applicant’s debt service ratio. However, it is imperative you remember no one knows your budget better than you.

Second, review your credit report. If there are any derogatory items it is extremely important to address and rectify these matters immediately.

Oftentimes I am asked: What is the quickest and easiest way to repair or fix a credit report and improve a credit score when someone is looking to buy a home?

There are steps you can take that will help to improve your credit score so you can obtain an approval and get the best possible mortgage rate.

Note: I strongly recommend monitoring your credit report and credit score so you can keep track of your progress. TransUnion has the best credit report monitoring in my opinion, plus they include your credit score for free.

4 Tips

1. Contact your creditor(s) directly

You need to deal with derogatory items on your credit bureau before making a mortgage application with your financial institution. It is important to remove or satisfy negative items from your credit report. This can increase your credit score. Carefully review your credit report to find any negative items such as late payments, collections, judgments and write-offs.

2. Get your credit card balances under 15%

Credit utilization has become a major concern for lenders over the last few years. Lenders will take your credit card usage under consideration during the decision making process. If one or more of your credit cards are “maxed out” (or close to the limit), you should reduce your balance prior to making a mortgage application. Paying down individual credit cards so the balance is under 15% of your available credit will improve your profile and increase the probability of securing mortgage financing.

3. Avoid applying for any new loans or credit cards

It is also important that you do not apply for credit (loans, credit cards, etc.) while you’re in the process of making an application for a mortgage. Commonly referred to as “Credit Seeking” by the lenders, this is an additional area considered and of concern during the adjudication process. Excessive credit seeking can be as detrimental to you as derogatory credit or high credit utilization.

4. Look for a professional to help you

Whether you look to Crown Credit Solutions to obtain a Free Credit Evaluation or a lawyer to help you resolve a credit issue it is important to obtain informed guidance before you make a decision to take a course of action. In my experience I have witnessed easily solvable situations become serious issues simply by the way in which they were handled or not handled.

These tips and recommendations can be applied to any type of financing you are looking to obtain.

If you have any additional questions or concerns, do not hesitate to contact me or a member of our team.

At Crown Credit Solutions, while we are dedicated to providing our customers with financing solutions to secure a car, truck, van or SUV, we are committed to providing you with additional information that will help you build or rebuild your credit rating.

We realize how important it is for you to get all of the facts and options available in order to make a sound credit decision.

Whether your credit has been damaged due to change of circumstance (divorce, job loss, etc.), or perhaps you are new to credit or new to the country we understand and we are here to help.

You can call me directly at 204.275.4438, email me at gmccs@dilawri.net or come to our office at 1700C Waverley St. here in Winnipeg (inside the Crown Automax building).

 

Shaun Proutt,
General Manager
Crown Credit Solutions
Crown Automotive Group
1700 Waverley St.
Winnipeg, MB