If you have a non-traditional credit history and a high debt-to-income ratio, getting a mortgage can feel like an uphill battle. You may be worried that lenders won’t take you seriously or that the interest rate they offer will be too high. But don’t worry – with a few smart financial moves, you can still get the mortgage you need.
The first step is to make sure your credit score is in good shape. A good credit score shows potential lenders that you are responsible with your finances and are likely to pay back the loan. If your credit score is low, there are ways to improve it before you apply for a mortgage. Start by paying off any outstanding debts and checking your credit report for any errors or inaccuracies. Also, try to keep your balance on existing accounts below 30% of the limit; this will help raise your score over time.
Next, work on reducing your debt-to-income ratio (DTI). This is the amount of debt you have compared to your total income. Lenders view this as an indication of how much debt you can handle and how likely it is that you will pay back the loan on time. To reduce your DTI, start by paying down any existing debt and considering ways to increase income such as taking on extra side jobs or renting out part of your home.
Finally, shop around for a lender who is willing to work with people with non-traditional credit profiles and high DTIs. Look for lenders who offer special programs for people with unique financial situations; these lenders may be more willing to work with you than traditional banks or mortgage brokers. Also look into government programs such as FHA loans which have more flexible requirements than conventional loans and could help you secure financing at an affordable rate.
Getting a mortgage with a non-traditional credit history and high DTI isn’t impossible – it just takes some preparation and legwork on your part. Take the time to improve your credit score, reduce your DTI, and do some research so that when it comes time to apply for a loan, you’ll be in the best possible position to get approved quickly and easily!