Home Loans With Bad Credit: How to Get Pre-Approval

Finding the funds to buy a home can be a challenge these days, but getting home loans with bad credit is that little bit harder. And with uncertainty surrounding the likelihood of getting the application approved, the power to negotiate the best possible price for the property is lessened.The best way around this problem is securing mortgage pre-approval, where a lender confirms in writing the borrower has a certain amount of funds available. Sellers are happier because they can be sure of the sale going through, while buyers are in a stronger position to bid for the property.But qualifying for pre-approval needs to be done first, and while approval can be a drawn out process, the patience shown can lead to a better home loan deal.Qualifying for Pre-ApprovalSecuring home loans with bad credit can be a challenge, depending on the severity of the financial situation the applicant is in. But once an applicant qualifies for the loan, half the battle is won. To qualify for pre-approval, certain documents need to be prepared and submitted. There are four in particular that are needed.First of all, the loan application needs to include a statement of goals, to clarify what intention the borrower has. The goals are not just financial, but personal as well. This is because securing mortgage pre-approval is easier for those who have a settled plan, especially since a mortgage is a long-term commitment.Second, if a home is being sold to move to a new home, then a purchase agreement is needed. This proves to the lender that the funds are secure. Third is to provide tax documents to ensure that tax returns have been filed before applying for a home loan. Finally, a detailed list of monthly household expenses is needed to ascertain whether the mortgage is affordable.The Bad Credit FactorBad credit influences in the approval process, mainly by affecting the rate of interest to be charged. This is why home loans with bad credit can be so expensive. But the rate charged also depends on how the low credit score was achieved, and applicants have a chance to explain things to the lender.This is especially the case when securing mortgage pre-approval from a traditional lender, where loan officers will sit down and discuss the matter before making a decision. The reason why the time is taken is that lenders understand bad luck can affect the score, so poor financial habits are not to blame.Some documentation relating to the credit scores will also have to be provided. For example, a bankruptcy ruling has to be accounted for, as does any other financial hot water that an applicant might have been in. Only then will the lender feel comfortable when considering the home loan.Waiting for NewsThe process is easier when the applicant has an excellent credit history, but when seeking home loans with bad credit, there is more scrutiny placed on the matter. After all, a mortgage is a matter of hundreds of thousands of dollars, not a few thousands as a personal loan is. Therefore, accounting for the bad credit and how best to deal with it is only logical.Also, securing mortgage pre-approval takes anywhere between 60 days and 90 days, as lenders rigorously go through all the documentation provided. This is why it is a good idea to begin the process well in advance of beginning the search for a home.If the approval is successful, then a letter is provided confirming the pre-approved sum. And with the home loan safely secured, negotiation on the right home can begin.