Home Loan Mortgages With Bad Credit: 3 Easy Steps To Approval

May 11
11:43

2013

Devora Witts

Devora Witts

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Securing home loan mortgages with bad credit is not an easy undertaking, but there are ways to increase the chances of success. We list 3 of the most useful steps to improve approval.

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The challenge for anyone seeking to secure a home loan mortgage with bad creditis to convince mortgage providers that what seems to be a major risk is not actually a risk at all. It is this apparent risk that is behind the high interest rates,Home Loan Mortgages With Bad Credit: 3 Easy Steps To Approval Articles and therefore the expense of the deal.The good news is that not every mortgage provider is closed to the idea of granting mortgage approval with poor credit, so there are options for home hunters to find. What is more, whatever obstacles there may be to approval can be overcome by taking some measures in advance of submitting the application.We provide details on just 3 of these simple steps – the main issues lenders assess when considering whether or not to approve a home loan mortgage. If these are followed then the chances of getting the green light are increased dramatically.1. Know Your Credit StatusThe first step is to know your own credit status in detail. When seeking a home loan mortgage with bad credit, a key weapon in your armory is the ability to spot and strengthen the weaknesses in your application.  So, get a copy of your credit report from one of the 3 credit agencies, and identify the reasons for your low score. Be aware that errors are not unknown in these scores, so check to see they are up to date and that a recently cleared debt is accounted for.Getting mortgage approval with poor credit is easier with improved scores, so be prepared to take out a consolidation loan to clear some or all of them before submitting your application for the home loan mortgage. If the debts are cleared, then the score increases and the debt-to-income ratio is also improved – a key factor in any approval consideration.2. Commit a Larger Down PaymentOne of the biggest issues for lenders is the size of the debt that granting a home loan mortgage with bad credit creates. After all, with real estate prices averaging $200,000, the monthly repayments are not going to be small.But by offering a large down payment, the actual size of the mortgage is reduced. Normally, anything between 5% and 10% is expected as a down payment, so as much as $20,000 is needed a single lump sum. But by increasing the percentage to perhaps 20% ($40,000), the size of the required loan is lowered and mortgage approval with poor credit becomes that little bit easier.The challenge is to save that sum of money for a single payment, but there are solutions to that problem too. Taking out a personal loan on good terms can make the required down payment available, before applying for the home loan mortgage.3. Agree To A Longer Mortgage TermAffordability is the most important factor in any loan application, with lenders guaranteed to reject an application if the applicant is unable to afford the repayments. So, getting a home loan mortgage with bad credit is dependent on ensuring the repayments are affordable.This can be done by securing a longer term, effectively reducing the size of the repayment sum. For example, a $160,000 mortgage may cost $575 per month over 25 years, but over 35 years may cost $415. When seeking mortgage approval with poor credit the amount saved can be the difference between affordable and unaffordable.  The negative side to this deal is that more interest will be paid over the lifetime of the home loan mortgage, but this is generally acceptable when approval and the home most wanted is made attainable.