If you're looking to refinance your home, you're likely going to benefit from lower mortgage payments. But lower mortgage payments aren't the whole story with a refinance. Before you refinance, you'll want to ask your lender these five key questions – it'll help you ensure you're getting a deal you can afford.
There are several factors that are reviewed when you apply for a home mortgage, and one of the initial factors is your credit rating. You may already be aware that you have a lower credit score, or you may have learned about your credit issues after speaking with a mortgage professional. Now that you are aware of the situation, you may be concerned about your ability to get approved for your loan request. The good news is that you may still be able to get a mortgage without a favorable credit history with a few things.
A Co-Borrower Or Co-Signer
One of the best steps that you can take to strengthen your loan request is to find a co-borrower or co-signor for your loan request. Ideally, this will be an individual with a spotless credit history and great scores. There may be some rules in place regarding who can co-sign with you, so you may consider getting more advice from your mortgage representative before moving forward with this option.
A Large Down Payment
The size of your down payment essentially impacts the level of risk that a lender assumes when extending a loan to you, and your loan request is riskier to approve when you have a lower credit rating. You may be able to offset the fact that you have a troubled credit history by making a larger down payment. This may be a down payment that exceeds a standard 20 percent down payment.
A Willingness To Accept A Higher Interest Rate
Mortgage lenders typically have a tiered interest rate structure, and those with a lower credit score will qualify for a higher interest rate. There typically is a minimum threshold to the tier system, and each lender has a different minimum score that they will consider. However, generally, if you have a lower credit rating, you should be prepared to accept a higher interest rate with your loan request.
A lower credit rating will impact your ability to get approved for the best terms on a mortgage, but this does not necessarily mean that you cannot get approved at all. There are various steps that you may be able to take to strengthen your loan request and to structure the loan application so that underwriting will approve it. You can speak with your mortgage consultant today about the options available to you.