Bad Credit

Things about House Loans for Bad Credit that You and Your Spouse should have Asked


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Are you a first-time home buyer? You must have heard about many things and yes, credit scores require special attention here. Nowadays the credit score does not need to be stellar but it should exist. There are still people with no credit history and they must work on the report. After all, credit score is the main indicator of proving whether you are eligible to repay the money back or what your down payment should be. Yes, good credit makes the process of buying like a cakewalk; however, FHA loans, VA loans, or USDA loans make the process a lot easier than you ever imagined.

As your FICO score is under 620, you have undergone a series of rejections. Don’t let your hopes die down because you can still buckle up and buy the dream abode. Yes, the road is going to be rocky but it is not impossible at all. It is better to understand a few things to avert the possible risks of rejection in the future. After all, everyone can end up with bad credit one day because of a few missed bill payments or maxed out credit cards. When you are earnestly looking for house loans for bad credit, all you need to do is read the article further.

  • Is there a link between interest rates and FICO score?

When it comes to fixing the interest rate, the FICO score becomes a huge deal. The lower your credit score is, the higher you will have to pay for interest rates. Before you pick a lender, always run the interest rate business prior to the application procedure. When your credit score is below 600, do not assume that you will be turned down right away. You can find a lender who will qualify your FHA or VA loan application only if the requirements are met.

  • Can you get a cosigner for the application?

When you are worried that the loan application is weak enough due to credit score, you can get a cosigner. Cosigners offer peace of mind to the lenders when there is a chance of the primary borrower to miss payments. Until the primary borrower rebuilds credit again, the cosigner takes over. Additionally, if the borrower defaults, the cosigners can carry the load. When you are looking for a cosigner, make sure the person remains liable for the loan payments if you fail to pay on time.

  • Should you apply as a joint or single applicant?

When you and your spouse have dreamt of buying a house together, you can apply for the loan as joint applicants. The loan officers do not consider the highest credit score or average the two FICO scores at the time of checking the creditworthiness as a pair. On the contrary, professionals consider the lowest credit score. Even if your score looks good on paper and your husband’s doesn’t, the application may be turned down. The professionals evaluate the debt-to-income ratio for comparing the entire amount you owe every month to declare the eligibility. In case, the joint application is sanctioned and you have high DTI or poor credit, the interest rate will be high.

Of course, it is better to stay away from conventional loans when you have a low credit score. Ask the professionals whether you will be eligible for VA, FHA, or bank statement loan and how.

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.

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