Getting approved for a mortgage can feel daunting, especially if you have bad credit. However, it’s not impossible—there are steps you can take to improve your chances, especially when working with equity-based lenders like Lendworth. As long as your property shows liquidity and you meet a few key criteria, you can still secure the financing you need.
Here’s how you can get approved for a mortgage, even with bad credit:
1. Work with an Equity-Based Lender
Traditional lenders, like banks, heavily rely on your credit score to determine whether to approve your mortgage application. On the other hand, equity-based lenders, such as Lendworth, focus on the value of your property. We lend up to 75% loan-to-value (LTV) based on the property's marketability, rather than your credit score.
What does this mean? As long as your property is located in an area showing liquidity—meaning there’s a healthy demand for homes in your area—and you meet a few other conditions, your credit score is less of a factor.
2. Ensure Your Property is in a Marketable Area
Location is key when dealing with equity-based lenders. Lenders will assess how easily your property can be sold in case of default, so homes in more sought-after areas are more likely to get approved for financing. Before applying, ensure your property is in an area that shows good liquidity, meaning it is easy to sell if necessary.
3. Address Any Outstanding Taxes
One of the major factors that could prevent you from getting approved for a mortgage is having outstanding taxes. If you owe property taxes or personal income taxes, it’s essential to settle these debts before applying. Equity-based lenders like Lendworth will require that you don’t have any unpaid taxes, as this indicates financial instability.
4. Have Sufficient Equity in Your Home
Equity-based lenders focus on the amount of equity you have in your home. The more equity, the better your chances of approval. At Lendworth, we lend up to 75% of your home’s current value, so having at least 25% equity in your property will increase your likelihood of approval, even with a poor credit score.
5. Improve Your Debt-to-Income Ratio
While credit scores are not the primary factor for equity-based lenders, it’s still helpful to improve your debt-to-income ratio. This ratio compares your monthly debt payments to your monthly income. Reducing your debts or increasing your income can boost your application and make you appear more financially stable to lenders.
6. Demonstrate Stable Income
Lenders want to ensure you have the means to make your mortgage payments, so having a stable and reliable source of income is crucial. Even with bad credit, showing consistent income can greatly improve your chances of getting approved.
7. Consider a Co-Signer
If your credit is very poor, another option is to bring in a co-signer. A co-signer with a better credit score can help secure your mortgage, as lenders will consider their creditworthiness when evaluating the loan.
8. Get a Free Assessment with Lendworth
At Lendworth, we specialize in helping people with bad credit secure the mortgage they need. We’re more focused on your property’s equity and liquidity than your credit score, giving you a better chance of approval. Plus, we make the process easy and stress-free with a free assessment to review your unique situation.
Final Thoughts
Bad credit doesn’t have to stand in the way of owning a home or refinancing your current mortgage. By working with an equity-based lender like Lendworth, you can leverage the value of your property to get approved for financing. Focus on settling any outstanding taxes, ensuring your property is in a liquid area, and maintaining stable income.
Call us today for a free assessment and find out how we can help you get approved for a mortgage, no matter your credit score.
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