How to Apply for a Mortgage with Poor Credit

Anyone who is applying for a mortgage understands the importance of a good credit score. It provides the lender with a glimpse of a person’s current financial circumstances and capability to pay for a loan. But is it impossible to get approved for a mortgage if you have poor credit? Financial experts may say that your credit rating is only one factor because mortgage lenders will still look at other strengths the buyer may possess.

Why is your credit score important to mortgage lenders?

Your credit score is an official record which determines how risky it is to lend you money. Since your credit rating is essentially a history of your financial activities, lenders can also assess how well or how poorly you managed your past debts and other financial obligations.

In some instances, even if you currently possess a high credit rating, lenders may also check if you have a lot of existing debt which requires repayment. Some lenders may see this as a potential burden and could end up not extending the mortgage.

How do you qualify for a loan with bad credit?

If you have poor credit, getting a mortgage loan is not impossible. You can consider loan programs designed for individuals with low credit scores. Another excellent option is to compare mortgage offers from online marketplaces which use an extensive network of lenders, thus increasing your chances of finding a lender that will extend a mortgage to low credit borrowers.

Online marketplaces like Harpquiz, lowermybills.com, and LendingTree have different features and online tools like valuation tools and calculators to aid mortgage applicants through the process. Lastly, borrowers with low credit scores you may look into government-backed mortgage programs like FHA loans.

It also helps to compare and read online reviews to find a lender or online marketplace which works best for individuals with low credit scores.

How to overcome problems with your credit

Although negative marks on your credit remain a concern for mortgage lenders, it is not always a dead end. Here are common workarounds lenders may do to address credit history issues.

  • If you filed a chapter 7 bankruptcy, you need to wait at least two years until you can qualify for an FHA loan, while you need at least three before you can apply for a conventional loan.
  • Mortgage late payments. If you only have one late payment within a period of 12 months, lenders are willing to overlook this. However, it is a different case altogether if there are multiple instances of late payments within the same year.
  • Delinquency patterns. Most mortgage lenders still work with borrowers even if they have patterns of delinquency showing in their credit reports. However, the lender may require a larger down payment and low debt-to-income ratio in your credit report.

Your credit report does impact the probability of getting a good interest rate and fast mortgage approval. Nonetheless, don’t lose hope if you are still in the process of building your credit rating. Many lenders are flexible enough to consider extending a mortgage even if you have bad credit.


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