How to Secure a Mortgage Loan Despite Negative Credit Report

The home mortgage debt amount has decreased from previous years. But there are very little fluctuations in this segment. Between the second quarter of 2013 and 2016, the mortgage debt amount remained almost the same. The stat figures suggest various people are opting for mortgage loan.

A poor credit score makes it difficult to obtain a mortgage loan. If your credit score is not impressive, then you’d get a mortgage at a high interest rate. Like a vicious circle, this will further affect your credit score because many a times, consumers are not able to pay off the interest rate for it being very high.

Improve your score

This is a must if you want to have a lucrative mortgage deal. But it’s not easy, rather quite difficult. How can you fix your score and have a mortgage loan at a flexible interest rate? Let me discuss that in this article.

Negotiate with creditors

What’s your objective? Your objective is to present a glowing credit report in front of the lender, so that he grants you a mortgage loan at a low-interest rate. Negotiating with your creditor is the very first step you can take towards this direction. Don’t expect a goodwill adjustment from the creditor if you don’t have a good relationship with him.

Creditors may agree to remove late payments and collections from your credit report, but they may ask you to sign up for automatic payment in return.

Don’t apply for loans

You are strongly advised not to apply for a new credit card or a new loan. You might be thinking of applying for an auto loan. My suggestion to you is, don’t. An application for a loan shows on the consumer’s credit report as a hard inquiry. Click here to know about hard inquiries, and how they affect credit scores.

When you are in the middle of getting a mortgage, it’s assumed that you have sufficient credit. But an application for credit proves otherwise. I advise you to wait until you are through with mortgage process, and then apply for a new loan. Or else, you can collect money from your friends and family members, so your credit report stays unaffected.

Reduce credit card balance

Cutting down on credit card balance can help you fix your credit score. Mortgage lenders consider the usage on credit cards, which means if you have maxed out your credit card/s, then it’d negatively affect your credit score. Keep the credit card balance between 10% and 15%. If your credit limit is $2000, don’t spend more than $200-$300.

One strategy applied by many to lower the balance on a credit card is consolidating several cards. The process involves too many nitty-gritties, and for that reason, you may have to consult with a financial advisor or a debt consolidation firm. If you don’t want to spend money, and use organic methods, then you can follow some quick ways to improve the credit utilization or balance-to-limit ratio.

Sometimes, cardholders follow both paid and unpaid strategies to optimize their credit scores, which experts also recommend.

Goodwill adjustment

In my previous article, I discussed how lenders can be persuaded to grant a goodwill adjustment. Having a good relation with the lender is a must for it. Sometimes, borrowers have a lukewarm relationship with creditors, still they spare them goodwill adjustment because borrowers agree to the terms provided by the lenders.

This means you can get a goodwill adjustment and late payments, charge-offs, etc can be removed from your credit report without having a cozy relationship with the creditor. All you need to do is write a goodwill letter to original creditors, requesting them to remove negative items from the credit report.

Explain your situation in the letter, the reasons for the occurrence of the negative items, and inform them that you are applying for a mortgage loan. They may forgive you with or without some conditions.

Convince mortgage lender

If a mortgage lender refuses a loan to you because of your not-so-impressive credit report, that’s because he feels you won’t be able to repay it. If you can assure him that you can pay off the money that you are borrowing, and your credit score dropped because of circumstances, then you might be able to get the loan.

What do you think of the ways described here to secure a mortgage loan? Do you have any suggestion that you would like to share with us? Feel free to mail me.