Getting Mortgage Loans With Bad Credit: How to Secure Fast Approval

Jan 25
16:29

2013

Sarah Dinkins

Sarah Dinkins

  • Share this article on Facebook
  • Share this article on Twitter
  • Share this article on Linkedin

Buying a new home is not a simple thing, especially for bad credit borrowers. But, it is possible to get mortgage loans with bad credit, especially when some important aspects are addressed.

mediaimage
When starting out in the hunt for a new home,Getting Mortgage Loans With Bad Credit: How to Secure Fast Approval Articles bad credit borrowers face an uphill task. The reason? Most lenders are hesitant to grant such large sums to individuals with a poor credit history. But getting a mortgage loan with bad credit is not quite as difficult as people expect.Traditional lenders, like banks, are known for their conservative attitudes towards lending, but the growing presence of online lenders has led to a greater number of mortgage financing packages becoming available. And because these packages are designed to suit bad credit borrowers, securing loan approval has become somewhat more straightforward too.So, for most applicants, the chances of getting the mortgage loan they thought was out of reach are increased significantly. But, nonetheless, it is important to address a number of issues to maximize the likelihood of being approved.Know What is AffordableThere is little point in submitting an application for a mortgage loan with bad credit if the loan repayments are completely unaffordable. If the applicant has an income of $30,000 annually, then there is no chance of buying a $500,000 home. So, calculating an affordable budget is hugely important.The calculation involves listing the typical monthly outgoings already being paid, and drawing that against the monthly income. The excess balance each month gives a picture of what kind of mortgage is within reach. Securing loan approval also becomes more plausible.However, remember when calculating the maximum mortgage loan attainable, it is necessary to include the debt-to-income ratio. If the amount of existing debt is high, then it means the pressure on meeting repayments is also high. With a maximum 40% of income permitted to repay loans, failure to stay within that limit guarantees rejection.Use a Down PaymentA down payment has a major benefit to any application for a mortgage loan with bad credit. The reason is that, with the down payment made, the size of the required mortgage is lowered. If the mortgage is lower, and repayments are lower, the debt is therefore lower, making the whole transaction ultimately more affordable.Imagine a typical down payment of 5% on a home worth $100,000. It leaves a balance of $95,000 to complete the purchase, and this is the value of the mortgage required. If the payment is higher, say 20%, it lowers the the required mortgage to $80,000, lowering the debt even further, so securing loan approval becomes easier still.Still, with homes of $250,000 or so, the commitment required to save even 5% of the value is significant. But if it is achieved, then lenders are all the more impressed, and are more likely to grant the mortgage loan.Finding a LenderOf course, the lender is as crucial an element in putting together a successful application for a mortgage loan with bad credit as anything else. This is because it is their lending policy that dictates the interest rate charged, the late fees and penalties, and the repayment structures too. They also need to be approachable so that rescheduling can occur if there are repayment problems in the future.Generally speaking, online lenders are the most approachable, with more competitive terms and lower interest rates. They are ideal for applicants with poor credit histories, so securing loan approval is more likely with them than with traditional lenders.However, regardless of the reputation of a mortgage lender, it is important to take time to examine any mortgage loan deal before signing up to it. There may be hidden charges in the small print, or a penalty scheme that makes the whole deal more expensive than it first seemed.