Key Pointers for Getting a Mortgage with Less than Perfect Credit

Due to the recent drop off in mortgage applications, lenders are starting to loosen their lending requirements.

With so many reports in the news about the stringent lending requirements put into place after the 2007-2008 mortgage market meltdown, many prospective buyers have sat on the sidelines. The reluctance of many would be homebuyers to submit an application for a home loan is due to low credit scores. Comparatively speaking, people have lower credit scores today than they did in the mid 2000’s due to job losses and wage cuts during the Great Recession.

With the Slowdown in the Mortgage Market, Smaller Lenders are Reducing Their Rates

Since banks and private lenders only make money when they extend mortgage financing to home borrowers, the slack in the mortgage applications has prompted them to loosen their standards. This means that people who have credit scores in the fair to poor range (550 to 699) are now finding they are having their mortgage applications approved. By manually underwriting loans, smaller banks and private lenders are able to give more weight factors other than credit scores.

Some examples of these alternative underwriting standards include:

 

  • One year of on time rent and utility payments

 

 

  • Credit problems due to a period of unemployment during the recession

 

 

  • Mortgage payments similar to rental payments

 

Another way to overcome a poor credit score is to pay a higher down payment than what is traditionally required for a home loan.

To find out how you can secure a mortgage for your dream home, even with less than perfect credit, contact an independent mortgage broker today!