Get a Home Loan with Bad Credit: Three Additional Factors
If you want to get a home loan with bad credit, other factors that go into determining your eligibility for this loan will be important. This article will give you details about these factors.
Factor #1: Down Payment
If you have bad credit, home loans will be far easier to come by if you can offer a large down payment. A good rule of thumb is to save at least 20% of the total purchase price of your home. The impact of a large down payment on your ability to find a home loan with bad credit is two-fold:
1. It reduces the loanís principle amount.
The more cash you have to offer the bank, the less money they need to offer you in a home loan. This means that you will be more likely to qualify for the home loan you want since it is for a lower sum. Your bad credit will still be a factor, but the lower principle will make the risk less for the bank or lender.
2. It shows you have reformed your ways.
Many people develop bad credit due to two factors: too much spending and/or not enough income. That is, bad credit is often the result of missed and late payments on outstanding debt. Though it is easy to fall into hard times and accumulate bad credit, recovering from a poor credit score is a lot harder Ė especially if bankruptcy is involved. Therefore, providing a large sum as a down payment on your home loan will show a lender that you have become more financially responsible. This will go a long way in helping the lender trust that you are ready and able to take on the responsibility of a home loan.
Factor #2: Home Cost
Again, there are two main factors that will impact a lenderís decision to give you a home loan in this section. The cost that you pay for the home you want impacts the lenderís ability to help you out. Obviously, the lower the cost of the home, the lower the loan needed. Negotiating a lower purchase price or shopping around to find a house with the idea price will make a lender see how serious you are about affording your loan. Know your limits and stick to them.
Also, cost is important because of a little thing called equity. Majority of the people who were burned in the housing bubble bust of the late 2000ís had to foreclose on their homes because they were underwater on their mortgage payments. This means that the value of the house was less than the amount that they owed in the loan. Making sure to negotiate price and get an independent assessment on the home you want to buy will help you to avoid that same fate.
Factor #3: Choosing the Best Lender
The final factor that you need to consider in finding a home loan with bad credit is who is lending you the money. Generally, traditional banks and local credit unions are less likely to work with borrowers who have credit issues. Therefore, online lenders are a better bet.
Make sure that you shop around for your home loan, talking to 3-5 different online lenders in order to get the best price. Generally, these lenders specialize in bad credit lending and can help you find a home loan with bad credit easily.
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
Mark Venite is the author of this article and a successful financial advisor with 20 years of experience. He helps people to get approved for Bad Credit Personal Loans for 5000 and Bad Credit Student Loans Guaranteed. For more information about his services please visit him at http://www.accessmyloan.com/