Securing a mortgage with good income but bad credit
Your credit score drops when there is a consistent delay in payment of your credit card bills. While it is easy to lose points, building it up can be challenging, even after your financial situation has changed. If you currently have a good income but bad credit, it may affect your ability to access a loan for a home. However, there are ways to work around it and increase your chances of getting your mortgage approved.
Mortgage on good income but bad credit
Before applying for a loan, you need to know a few key things. The three main things are:
Interest rates and down payments
Currently, bad credit mortgage rates vary by lender. When your credit score is impressive, your interest rate for a mortgage will be low, but when you have bad credit, the interest rate will be high. This already increases your monthly repayment expenses. Apart from the interest rates, you also need to consider the down payment.
With bad credit, you will need to make more down payments, 15% to 20%, instead of 5% to 10%. This should be fine if your income remains good. The good news is that you can continually improve your credit score and refinance your house to get better interest rates later.
Consider the type of mortgage
Are you trying to get a mortgage for a house you intend to live in with your family, or do you want to buy a property to rent? Is it a single mortgage or a joint mortgage? The criteria for application will vary depending on the type of mortgage you seek, so read the terms and make sure you meet the requirements.
Invest in something else
With other investments under your belt, you show that you have the business acumen and responsibility to earn more. Spend less on luxuries and more on investments that are likely to yield results. If you are a salary earner, consider investing in a passive income stream to supplement your fixed earnings.
Spend responsible
The fact that you currently have a good income doesn’t give you a pass to spend irresponsibly. This is especially true for people who have just started earning good money. Design a budget, work with it monthly, and stay within that budget. Also, make sure you settle all the unpaid bills that ruined your credit rating in the first place before you apply for a mortgage.
Talk to an expert
A handful of lenders offer mortgages to people with good income but bad credit. However, finding one with fair rates may take a lot of work. Consider talking to a professional who has the expertise and information required to match you with the best broker. These experts may charge a small fee, but it would be worth it if you wanted targeted help.
Conclusion
Your bad credit might reduce your chances of getting a mortgage with good rates, but you can still get a reasonable offer. You can get a house if your income is consistent and large enough to cover your monthly payments. Finally, always take active steps to improve your credit score, even after you have moved into the house.
