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What effect will having bad credit have on my ability to get a mortgage?
Unfortunately, having bad credit can have a very adverse effect on whether or not you can obtain a mortgage. When you apply for a home loan, banks will look at not only your credit score, but your entire credit file.
Things like missed or late payments, maxed limits, and collection items will all reflect poorly on you. The bank is looking through this information for a reason; they want to know if you can afford the monthly payments that will be due each month, and they also want some kind of guarantee that you are going to make the payments in full and on time each month.
Unfortunately, they cannot take your word for it and your history is what will seal the deal or break it completely.
Whilst your bad credit can make or break you, there are a few other factors that could sway the situation to your favor. For example, if you are married to someone with an excellent credit score or if you can put a lot of money into the down payment for the house, then you will increase your odds of getting the loan.
However, just getting the loan is one thing. If you have bad credit, you can expect to pay a much higher interest rate than those people with excellent credit scores. This raises the amount of your monthly payment and will amount to thousands of extra dollars that you will have paid on your home by the time it is paid off.
For this reason, you really need to be as prepared as you can before even considering buying a home. It is best to spend as much time as you can working on your credit and making sure your report is as clear as possible. It will take some time and will no doubt be frustrating, but it will certainly be better for you and your wallet in the long run.
How do you do this? You do this by using the credit that you have. You can charge items each month and pay them off each month. You can also make sure that your utility bills and other payments are paid on time. Furthermore, you can take a look at your credit file to make sure that there are not negative items listed that shouldn’t be there.
If they are, you simply contact the credit provider and request that the item be removed. You should see it removed in approximately 5 working days if your request is granted.
If it requires further investigation, it can take up to 30 days.
Nevertheless, bad credit doesn’t have to last forever. You can fix it or make it better so that you can secure the mortgage you need to get the home of your dreams.
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