Raising Your Credit Score Can Increase Your Chances for a Poor Credit Mortgage Approval

By Michele Lerner
Mortgage Credit Problems Columnist

Potential home buyers have been frustrated in recent years by the difficulty in getting a mortgage loan approval. Even borrowers with good credit have been turned down for mortgages because the home they want to buy is in disrepair, the appraisal came in too low, or the condominium association had financial problems.

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Liz Pulliam Weston, a financial columnist for MSN Money, lists ten top reasons that can stop a home loan approval. Two of the items on her list depend on the creditworthiness of the borrowers.

Debt Problems and Bad Credit Loans

Weston says, "If your projected housing-and-debt ratio exceeds 40% of your income, you should think twice about buying a home - not because you won't get approved (you might), but simply because you are carrying too much debt. At the very least, you should pay off all credit cards and other toxic debt."

Bad credit mortgage lenders typically have less strict requirements than other lenders, but they will still want to be sure you can make your monthly loan payments. Fill out the form on this page to see if you qualify for the lowest mortgage rates.

If you cannot pay off all your credit card debt before applying for a mortgage, at least make sure you are paying as much as you can to reduce your debts. Paying your bills on time every month and reducing your credit card balance as much as possible can improve your credit score and allow you to qualify for a bad credit mortgage at a better rate.

Bad Credit Mortgage Lenders and Private Mortgage Insurance

Prime mortgage lenders require mortgage insurance on loans exceeding 80% of the property's value. But mortgage insurers are very picky about who they insure; minimum required credit scores range from 680 to 740. Bad credit lenders don't have the option of putting some of the default risk onto mortgage insurers, so they have to charge extra for assuming that risk themselves. That's one reason that bad credit mortgages carry higher interest rates and fees.

Compare mortgage rates online by entering your data on this page for a bad credit mortgage.



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