Your credit history is one of the most important details that lenders consider when approving you for a mortgage. Bad credit or a low credit score will lower the ability to get a mortgage, as lenders will consider you at risk of defaulting on your loan. Obtaining a mortgage has become even more difficult due to the struggling economy and the record number of foreclosures in the housing market. Your credit score is a numerical reflection of the times of credit available to you as well as the terms that lenders are willing to offer. Your credit score is generally based on your past credit history – your behaviour as a borrower. You are rated on whether you make payments on time, how often you make new credit enquiries, the length of your credit history and the types of credit you use.
Mortgage lenders look at a host of factors when deciding whether or not to lend you money. One of those factors is your credit card score. But another factor is your down payment score. With some lenders, you may be able to offset a weak credit card score with a higher down payment. With a bigger down payment, you will have more equity in your home, which means the lender takes less of a risk when lending you a mortgage loan for bad credit in Houston.
When bad credit mortgage lender in Houston looks at your loan application, he or she will take into account your ability to pay your current expenses (rent, utilities, credit card payments) on time every month. The lenders will also check that you have been employed with a steady income for at least two years and are making enough money to all your bills every month. If you are self-employed, you should try to maintain a steady annual salary. Being self-employed and having a low credit score can lead to some frustration when applying for a mortgage.
When you have bad credit or a low credit score, lenders may offer you a sub-prime mortgage. Lenders charge higher interest rates on sub-prime mortgages in order to compensate for the higher loan default risk they are taking on the mortgage. This works the other way too: the better your credit score is, the lower your interest rate on your mortgage will be.
If your current financial state needs improvement, or if your credit score is too low to qualify for a loan, it may be a good idea to hold off on applying for a mortgage.
