However, this problem also applies to those who's income is limited because they're starting a new business. But don't worry, you can learn how to get a mortgage on a low income. Keep reading for some of the most effective tips and tricks.
1. Boost Your Credit Score
Your credit report is a huge factor when it comes to getting approved for any loan, mortgages included. Lenders look at your credit report to see your financial history to decide if they trust you with their money (more or less).
While boosting your credit score can take time, it is one of the most guaranteed ways of insuring your odds to get approved for a mortgage, even with low income.
You can start by minimizing your debt to income ratio. Lenders want to be sure that you can afford their monthly payments. If you make $2,000 a month but already have over $1,000 going out, you won't be a good candidate. You can do this by consolidating your debt, downgrading your vehicle, minimizing your subscriptions and memberships, etc.
Lenders will also want to see some form of payment/income history. If you're self-employed or need help proving income, we recommend using PayStubCreator to document your earnings.
2. Find A Co-Signer
Learning how to get a mortgage on a low income may mean finding a co-signer. If your co-signer is your spouse, this shouldn't be a big deal.
However, it can be a lot to ask from someone else. Their name will be tied to the loan just like yours, which may inhibit them from getting approved for car loans, mortgages, or leases in the future.
Additionally, if you find someone to co-sign but their credit score is also low, it may not do you any good. In the same way that two wrongs don't make a right, two bad credit scores don't equal good credit.
People to ask would be close friends or family members who are already well-established, responsible with money, and are unlikely to apply for any loans anytime soon.
3. Start Small
Finally, learning how to get a mortgage on a low income may mean scaling back your standards. This isn't the time to look for your dream house with a three-car garage and a pool in the backyard. Let your living situation grow with your business/income and scale up as your financial picture starts to improve.
Alternatively, maybe right now isn't the best time to buy a house. You may consider waiting a couple of years until your business grows or your budgetary status has changed. After all, a mortgage is a huge (and legally binding) financial obligation.
Get More Advice on How to Get a Mortgage on a Low Income
Remember, if you're trying to figure out how to get a mortgage on a low income and coming up blank, there are always more answers out there. However, also keep in mind that it may be wiser to wait for your financial situation to improve, as a mortgage is another debt that could potentially devastate your finances.
And if you're looking for more advice, be sure to check out the rest of our articles before you go!