Getting a mortgage with a non-traditional credit history and low debt-to-income ratio can be a challenge. But it’s not impossible. There are steps you can take to improve your chances of getting approved for a loan and make the process easier.
First, it’s important to understand your credit score and what lenders are looking for. Your credit score is an important factor in determining whether or not you will be approved for a mortgage, so make sure you know what it is and how to improve it. If your credit score is low, there are things you can do to boost it such as paying down debt, making payments on time, disputing errors on your credit report, and more.
Second, start saving money for a down payment. The more money you can put down on the house up front, the better off you’ll be. This will lower your total loan amount and make it easier to get approved for a mortgage with a non-traditional credit history and low debt-to-income ratio. Consider putting away at least 20% of the purchase price of the home in savings before applying for financing.
Third, reduce your current debt obligations as much as possible before applying for financing. Lenders want to see that you have enough income available after paying all of your monthly debts to cover the cost of the mortgage payments each month without strain. Reduce or eliminate high interest rate debts such as credit cards to lower your debt-to-income ratio (DTI) before applying for financing.
Fourth, shop around for lenders who specialize in non-traditional financing or working with consumers with lower DTIs or less than perfect credit scores. There are lenders out there who specialize in this type of situation and may be able to provide more favorable terms than traditional lenders who look only at FICO scores when deciding whether or not to approve loans.
Finally, seek out professional advice from a financial advisor or housing counselor if available where you live. These professionals can help guide you through the process of getting preapproved for financing and help negotiate terms that work best for both parties involved in the loan transaction process.
Getting a mortgage with a non-traditional credit history and low debt-to-income ratio isn’t easy but it’s certainly doable if you take steps now to improve your financial picture and find the right lender who is willing to work with someone in that situation. With some preparation and planning ahead of time, you could be on the way towards owning your dream home sooner than you think!