What is the best way to get a mortgage if you have a low credit score? Is it even possible to assume a mortgage today or is it possible to get a no document loan?

Your credit score will not be the only thing a lender will consider when reviewing an application for a mortgage loan. If the other credit qualifications are strong enough to outweigh the low credit score there may be a chance to get an approval.

Length of employment and debt to income are two credit qualifications that can present a strong argument for approval. If you have 7 to 10 or more years with your current employer, or at least in continuous, like employment and your income is four times higher than the proposed mortgage payment, you have begun to offset the damage to your creditworthiness a low credit score can represent.

Security position is another area the lender will consider. A large down payment in excess of 20% of the purchase price of the property will give the lender even more comfort and tend to further offset the low FICO score.

Your debt position is another consideration. If you have no other, or negligible, outstanding debt that would be a very positive credit factor in your favor.

Finally, discuss your credit history with the lender (this is why it is important to be dealing with a direct, local lender and make sure he/she is the one who will be making the credit decision). Explain the circumstances surrounding your past credit problems and let them know you have turned the corner and understand the importance of rebuilding your credit.

An assumption of an existing mortgage is an option however the credit qualifications will likely be just as stringent as they would be for a new loan. No-document loans have gone the way of the sub-prime mortgage lender: into mortgage banking oblivion.

A very good alternative to applying for a loan would be to have your real estate broker write an offer contingent on the seller accepting a land sale contract, or taking back mortgage for the sale price less your down payment. In this market, a very strong buyer’s market, you have a good chance the seller will accept.

Without seller financing or the credit qualifications mentioned above, it will be very difficult to get a mortgage to buy a home.

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2 Responses to What is the best way to get a mortgage if you have a low credit score? Is it even possible to assume a mortgage today or is it possible to get a no document loan?

  1. Thank you very much for your post! I am very interested in your points.

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