There is no doubt that getting the green light on a home loan with bad credit is not the simplest of tasks, but by no means is it an impossibility. Thankfully, there are many mortgage packages available to those with low credit scores that are competitive and affordable, ensuring they can buy a new home too.
It might seem strange that this is possible, but since credit scores are not the most influential part of any application, securing mortgage loan approval is not necessarily ruined by a very low score. There are several other elements to an application that are more influential.
Of course, getting the home loan depends on meeting set criteria, but it can be helped along greatly when some preparatory measures have been taken in advance.
Know Your Credit History
The first measure to take is to learn precisely your credit history. A credit score will affect the interest rate that is charged on any loan, so if the score is very low, this can make getting a home loan with bad credit very expensive. Knowing how the score came to be, can point to the best route to improvement.
It is worth keeping in mind that lenders need to lend to turn a profit, so there is a willingness there to grant mortgage loan approvals. Of course, the principal criteria to meet is to prove a long-term ability to repay the mortgage. And in this regard, improving credit scores can have a positive impact.
What applicant must do before applying for a home loan is buy their credit report from one of the three agencies - Experian, TransUnion and Equifax - and check the score and the reasons for it. It is always possible that errors have been made so request a review if necessary. Repaying some existing loans will also result in an improved score.
Where Are The Best Deals?
When applying for home loans with bad credit, it is only logical that applicants seek the best deals they can possibly find. With online lenders, this job is made easier with comparison sites allowing millions of offers to be filtered through in seconds. Traditional mortgage providers are almost always more expensive.
What is more, online lenders are much more accommodating to bad credit borrowers, and are experts in that niche. They are also more willing to ignore credit scores, so the chances of securing mortgage loan approval, even with a very bad credit history, is much easier.
Of course, while there are clear advantages, there is also a need to be wary when dealing with online lenders. It is important to check out the reputation of any prospective lender through either the Better Business Bureau or the Verify1st websites before selecting a home loan and committing to it.
Consider the Down Payment
Sometimes, the down payment is actually the swing factor when seeking a home loan with bad credit. The reason is that it can significantly reduce the size of the mortgage requires.
Basically, if a house is worth 0,000 and the typical down payment rate of 5% of the purchase price is paid, then a mortgage of 0,000 is needed. But if a 20% down payment were made, 0,000 is needed. It does not require a genius to realize mortgage loan approval is easier to get on 0,000 than 0,000.
Also, the fact that an applicant can save as much as ,000 (20% of the purchase price), will greatly impress the lenders. So, getting the home loan becomes almost assured.