Forget the myths surrounding low credit scores. People with low credit scores can also apply for mortgage under some conditions. Generally, a credit score above 680 is considered good enough for approval. However, credit score between 620 and 680 also has good chances to get approved, even though it is considered low. Under 620, the approval chances are very low. Here are expert legal tips to qualify for mortgage even with low credit.

Identify the Red Flags

The first step to improve your credit profile is to identify the red flags which may cause lenders to reject the mortgage.

• Delayed student loan payments within the past 12 months are taken as a red flag for FHA loans; however, you may get a conventional loan if you have a good credit history after completely paying off the student loan.

• You can get an FHA loan only if the foreclosure date is 36 months old. The down-payment would be 3.5% for the FHA loan. If the foreclosure date had passed 48 months ago, then you don’t need to make any down payment for a VA loan.

When seeking a conventional loan, a seven year old foreclosure date is required with no flexibility in down payment. These conditions are very strict and if your profile lapses in any of these, then your application has high chances of being rejected.

• You qualify for 3.5% down payment for the FHA loan after 24 months of bankruptcy, and a no-down payment VA loan after 48 months of bankruptcy.

Buyer’s Homework

If you have a low credit score and you want to qualify for the loan, then discuss it with a legal advisor. Generally, we have three techniques to fix a low credit application.

• Improve the approval odds: If your billing and payment history is qualitative and punctual, then it will overcome your bad credit. Pay your bills and rent on time for at least 12 months to improve your credit history.
• Explain: Fortunately, lenders are always open to know the reason of your low score. For example; you may get your loan approved if you have explained why your student loan fee repayments were delayed. Lenders classify your late repayments as well. For example; a late car loan payment may indicate financial difficulty, but late student loan installments or medical bill payments do not directly link to your financial conditions, and therefore, need to be explained.
• Judging Your Potential: Getting a mortgage may be a tricky A borrower may adhere to FHA guidelines and restrictions but may not get the mortgage due to lack of potential. Therefore, legal advice of a reputed consultant is necessary to know your potential.
• Specificity: When explaining your needs to a potential lender, be very specific about your finances. But make sure to give complete information about your financial needs and responsibilities.
• Documentation: With a low credit score, you need to improve your application structure and support it with authentic documents. Any fraudulent documentation can put you into trouble.