Finding a Mortgage with Bad Credit

How to Strengthen Your Mortgage Application

Even with bad credit, there are a few steps you can take to make your application stronger in the eyes of a lender. Follow these three tips to get started.

Get a Co-signer

Some lenders allow you to apply with a co-signer on your mortgage. This could be a parent, spouse, or other close relative or friend. The lender still uses the middle credit score of the borrower with the lowest credit, but you can use their income to help you qualify for the loan. The risk is that the co-signer is equally responsible for your mortgage and you’ll need to refinance in order to drop them off the loan in the future.

Lower Your Debt

Paying off debt in advance of applying for a mortgage helps to improve your credit score, especially if you’re tackling revolving debt through credit cards. Your “amounts owed” is one of the most impactful components of your score, so lowering your debt can quickly boost your credit. A smaller amount of debt also improves your debt-to-income ratio, which affects how much of a home loan you qualify for.

Pay More Money Down

A larger down payment strengthens your mortgage application regardless of your credit score. Because you are more financially vested in the home, the lender views you as more motivated to keep up with your payments each month. After all, if you were to go into foreclosure, you would lose all that equity you put into the home. You may even qualify for a better interest rate with a bigger down payment, which can offset the cost of a bad credit mortgage.

Frequently Asked Questions

by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.