How to Compensate for Poor Credit - Home Loans

When you have poor credit, home loans can be hard to get approved for. The best way to compensate for poor credit is through a large amount of money used for down payment and  reserves. You can also use the money to pay down the debt to achieve a higher credit score, or buy down interest points or use as a down payment on the loan. The more you can pay initially, the less the loan will be for, which means there is less risk involved for the bank. When there is less risk involved for the bank they are more likely to approve the loan.


If the bank will still not approve the loan even with a high amount of money in reserves to be used for down payment and closing costs, there is still a chance the bank will approve the loan with a cosigner. A cosigner is someone that will sign and verify that they will be responsible for all payments, should you stop paying.  The cosigner must have excellent credit, along with a good steady job before he or she will be approved. If the cosigner does not meet these requirement, the loan will be denied.

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