Having bad credit does not mean you cannot secure a commercial mortgage, whether you are going to buy a new home or need to refinance your existing mortgage. This great blog shows that it is possible for people to get commercial mortgages despite bad credit.
Here are a few tips on how to get a mortgage with bad credit. At least a few of these tips will be applicable to every person, though not all of this advice may be possible for everyone with bad credit.
Save Up Longer
When you’re applying for a loan on commercial property or residential, your creditworthiness improves along with the size of your down payment. If you pay 20% down, you’ll pay less (or no) mortgage insurance. If you have bad credit, you may be able to get the mortgage if you put 30% down on the property.
Rely on a Guarantor
If you want to improve your chances of getting approved, one of the best approach is to sweeten the deal for lenders by getting a guarantor. A guarantor is essentially a backstop for the lender; if you cannot pay your mortgage, the other person is legally obligated to do so.
Consider What You Can Really Afford
Before you go shopping for a mortgage, run the numbers as to what you can really afford. Remember that when you buy a property, you’ll build equity with each payment, but you have to pay the utilities, taxes, insurance and upkeep yourself, too. This makes commercial real estate ownership more expensive than renting for most people.
Run the numbers to see what you can afford to pay per month, and then look for lots you can afford instead of stretching yourself. Lenders may give you a better break on the mortgage rate if you’re not taking as big of a risk.
If you’ve cleaned up your credit and have your finances in order, you should shop around for a mortgage. Compare the rates on different websites and lending stands with different organisations. If you don’t know how to do this, use a commercial mortgage broker to find the best deal for you, given your situation.
Not all mortgage lenders use the same criteria to approve people, so one may offer you a subprime mortgage while another would only charge a slightly higher interest rate. When you’re shopping for a mortgage, remember that administrative fees and other charges will be part of the mortgage. Be careful not to get the loan with the cheapest monthly payment, since this might be a variable rate loan that will only go up in the future, or a very long-term loan that will cost more over the life of the loan than a standard 15 or 30 year mortgage.
There are also alternatives if you’re looking for a commercial mortgage with a reasonable rate even if you have less than stellar credit. Make sure you look at all the options available and don’t be afraid to shop around, since not all lenders will classify you as a bad credit risk.