Getting a Joint Mortgage when the Applicants have Bad Credit
A joint mortgage allows two people to apply together for a home loan in order to share a debt. While the debt is shared, typically only the income of the lower-wage earner is used to determine the interest rate on the loan. It is always best for both applicants to have good credit reports. The lowest credit score must be able to fall into eligible guidelines for a mortgage.
FHA Home Loans
A lot of people think they will be eligible for a federal home loan incentive if they cannot secure a private loan. This is not correct. While FHA mortgage guarantees are available to those with slightly blemished credit profiles, they still have very high credit requirements. If you have defaulted on a federal loan in the past, you will be immediately denied access to these loans. Those who have recently declared bankruptcy will also not be able to gain federal assistance to lower their mortgage interest rates.
First Time Buyer Incentives
If you have no glaring errors on credit but a short credit history, there are options for you to pursue. This is typically the case with young persons or first time home buyers. Since they have not paid off a mortgage previously, they may have a lack of installment debts to show their level of responsibility. If this describes you, then you should look into first time home buyer programs in your area. Though these loans may be subsidized or guaranteed by the federal government, they are administered locally. Search for properties that are being offered as FHA properties, such as town home or condo complexes. As long as you meet minimum credit requirements, these lenders will be less concerned about your short debt history.
Bad Credit Home Loans
When all federal options are off the table, you will need to look to high risk lenders to provide a bad credit home loan. This was much easier to do before the housing crisis that occurred in 2007. Bad credit borrowers could previously qualify for sub-prime, variable rate loans. Today, the industry is much more regulated. You will find a hard time locating any lenders that will provide you with a mortgage if your credit is not at least fair.
Tips for Securing Loans with Bad Credit
When the situation is looking dismal, meaning you both have bad credit, cannot get a first time home buyer grant, and cannot find an alternative lender, then it is time to brush up your credit quickly. Try taking out a high risk personal loan a few years before seeking your mortgage loan. If you pay this loan off on time, your credit will jump. Look for ways to cut back on household spending to pay down your credit card balances. As a couple, institute measures to save for a larger down payment such as having both parties go to work even if one is only currently earning an income. A higher down payment can go a long way to securing a moderate mortgage.