Low credit score? Six tips to get a home loan yet

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The credit score has now become an integral part of the house loan process. Maintaining a high credit score, a minimum of 750, can assist you in getting loans at rock bottom interest rates.

But what happens when your credit score goes down? You would possibly still get a loan but at a better interest rate at best, or your application may be rejected outright at the worst.

 Be able to pay a better interest rate

 Some lenders allow home loans to borrowers with poor credit scores, but they’re likely to charge a risk premium. If you are eligible for such a loan, it is important to evaluate the affordability of EMIs with high-interest rates. Banks usually recheck the credit of many borrowers once a year and reset the danger premiums if required.

 See if you’ll reduce your LTV

 Reducing your Loan to Value ratio also can help in getting a home equity credit once you have a poor credit score. Lowering the loan amount with a lower LTV reduces the risk for the lender because it will have less skin within the game. That might also mean higher out-of-pocket expenses for the borrower. If your credit score is much lower than the lender’s comfort level, you will reduce the LTV but it will not allow the loan.

 Consider getting a co-applicant

Having a co-applicant with an honest credit score can significantly improve the likelihood that one of the borrowers will approve a home equity credit application if they have a low credit score. The income and credit score of the joint applicant is considered to increase the joint repayment capacity; So, if one of the borrowers does not reach the income.

Check for a loan with an HFC

Banks generally have stricter criteria for borrower’s credit scores than housing finance companies. So, if you do not get a home equity credit from banks because of your low credit score, you will always ask for an HFC. Home equity credit interest rates are slightly higher than HFCs compared to banks; many HFCs have recently reduced their interest rates to stay competitive.

Negotiate together with your existing lender

 Sometimes negotiating together with your existing loan can help you get a home equity credit even if you have a sub-par credit score. During negotiations, you will offer a cheaper LTV that will lead to a lower loan amount or other eligible mortgage or proof of increased income or get a co-applicant to strengthen your case. If your credit score is much lower than the bank requirement, such discussions may not work.

 Reduce your existing small debts

If you have existing small debts, repaying them before applying for a home equity credit can also help improve your credit score. You must wait for your credit score to update before applying for a home equity credit. Repaying existing debts will increase your repayment capacity and help you to demand a much high loan amount.

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