Getting a mortgage is stressful enough when your credit is perfect. But buying a home with bad credit has never been a pleasant experience. Throughout the process, chances are you will be stressed out waiting for something to go wrong.
Before you apply for a poor credit mortgage, there are several things that you can do to maximize your chances of success. Ideally, you should start working on your credit at least six months prior to mortgage application. You may be surprised at just how much you can accomplish in this time and how much difference just a few points can make.
The first thing you will need to do is get a copy of your credit bureaus. Make sure you get all three, because mortgage lenders will look at what is called a tri merge credit report. They will see all three of your credit scores and most likely used the middle as your credit score for purposes of underwriting your loan.
Did you know that an estimated 87% of all credit bureaus have errors in them? Chances are yours does to. Review your credit report carefully and make special note of anything that might be negatively impacting your scores. Things like old accounts that should no longer be reporting and credit card limits reporting too low can have a big impact on your overall credit score. You will want to dispute these items directly with the credit bureaus.
Since you have six months, now is a good time to get yourself on a strict budget and work to eliminate as much revolving debt as you can. Try to raise extra cash by selling items that you no longer need on craigslist and eBay. You may even be able to earn cash online, by becoming a freelance writer or virtual assistant. Use this cash to reduce your debt load and you will be rewarded with a boost in your credit score.
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