Credit scores are the indicators to the lenders about a person’s money management ability. By demonstrating as have the capability to handle money more responsibly, one can improve the bad credit. Poor or bad credit scores can lead to impose high interest rates. If a person improved the credit scores, when he or she ready to qualify for a home loan, will help to get at the lower interest rates.
Improve credit scores: First, you need to improve your credit scores to get the eligibility for home loan. Making payments on time and full will improve your payment history. Use the credit cards marginally without open new lines of credit and overextending credit lines. Have a budget plan and stick to with that plan.
Say about your job stability: If you have been working for a same company for five or more years, and you are in the same industry for several years, highlight it to offset the bad credit history. If you have received any regular pay raises, annual merit pay increase or have a cost of living increase for every two years, regular bonuses, mention them in the home loan application as how your income has raised over several years. Additional money or proof of rising pay will help the lenders know that you will have sufficient money to offset the possible rise in the expenses, those are like utilities or taxes.
Increase down payment: The zero down payment days are pretty much gone. Under the Federal Housing Administration (FHA), you can get with a 3.5 percent down payment or 10 percent down payment. Generally, if the down payment is larger, the loan approval is quicker. For most people, the biggest obstacle to purchasing a home loan is amassing sufficient money for closing costs and down payment. If you are unable to come up with that funds on your own, there are a few local municipality and state government programs, as well as down payment assistance programs to help. Check with the possible home buyer assistance at your city.
Other assets: Show your financial assets that you have to the loan officers if you don’t have a large down payment or large cash reserve. For instance, if you have a whole life insurance, or a sizable 401(k) or any other retirement accounts, check out their value on the home loan application. With this strategy, lender can understand that you can pay from any of those source to make ends meet.
Show to your lenders that your bad credit is history, but now you are able to repay the loan. You can do it little more better by having some decent savings account and your retirement plan contribution.