If you have bad credit, then you might feel like you are going to be stuck renting for the rest of your life. Taking out a mortgage is no small undertaking even for people with good credit ratings, and getting your finances sorted out when you’re less well off can seem insurmountable. The good news is that there are sub-prime lenders that will work with people who have less great credit ratings, and they can help you to get on the housing ladder.
Putting Down a Deposit
When you take out a mortgage you will need to put down a deposit. During the height of economic optimism it was possible to get mortgages that covered close to the full value of a house. The amount of a mortgage versus the value of the house is expressed as a loan to value percentage – so with a 95% loan to value you’ll be putting down a five percent deposit. It is very hard to get such a large mortgage even with a good credit rating – 90% or even 80% LTV mortgages are more common these days, because banks want to see that people are able to save, and banks also want to know that if the house loses value because of a housing market crash, there would still be equity in the property to sell it at a later date.
Improving Your Credit Rating
If you have bad credit then you will have to look to a sub-prime lender, but there are things that you can do to improve your credit rating and perhaps widen your options. Start by getting a copy of your credit rating and clearing up any obvious errors – things like old financial associations that are no longer valid, debts that are not yours, or incorrect financial links such as those of flatmates or people that used to live at your address.
Look at any bad marks on your credit report. If you have debts that you can pay off in full, do so because that will help to improve your credit rating.
Your credit rating is affected by the amount of debt you have and also the amount of debt versus the amount of available debt (e.g. if you have several credit cards close to maxed out that could look worse than if you had similar debt but lots of extra room left to borrow). Sometimes, closing off lines of credit works in your favor but sometimes it is not a good idea – shutting a credit card that you have had for a long time could hamper your score because it means that you don’t have that evidence of a long-running relationship with a lender.
If you are planning on applying for a mortgage, try to make payments on your accounts on time, every time, and try to pay more than the minimum on any credit cards you have. You may get a better deal on your mortgage if you wait a while to apply, while taking measures to repair your rating. To know more about us visit the website at https://3cre.com/why-you-should-invest-in-commercial-real-estate-dayton-ohio/.