Homeowner Loans With Bad Credit: Practical Options To Choose From

Bad credit borrowers already know that getting lenders to approve loans requires some effort. But, there is also the comforting fact that loan options do exist, and that with enough preparation, the funds so badly needed can be secured. The availability of homeowner loans with bad credit is further proof of the fact.Normally, a homeowner can expect large loan approval with the minimum of worry. But not all homeowners have excellent credit scores, and in fact not all homeowners actually own their homes yet. Therefore, home equity as security is not always available.What is more, even tenants and leaseholders can apply for homeowner loans. To idea is that they can use the funds to improve their financial footing, and eventually secure their own home. But for these applicants, what are the options available to them? And can these loans really make a positive impact to their financial state?Option 1: Secured Homeowner LoansHome equity loans are the most obvious and most advantageous option, especially when it comes securing a homeowner loan with bad credit. Home equity is the most desirable form of collateral, and as such, is usually enough to make approval almost a guarantee.The equity on a home relates to the value that is not covered by the mortgage, but is actually owned by the homeowner. Equity actually increases every time a mortgage payment is made, as the payment effectively buys that value portion from the bank. It also grows when the market value of the home increases.Because equity usually represents a significant amount of money, it can make getting large loan approval pretty straightforward. The only condition is that the value of the equity matches the homeowner loan required. Some lenders ask for just 25% of the loan value in security, so home equity worth $50,000 could secure a loan of $200,000.Option 2: Unsecured Homeowner LoansThis option is ideal for applicants who do not have any equity, such as tenant and leaseholders. Obviously, the terms available to those seeking unsecured homeowner loans with bad credit are not going to be ideal, but they do provide a way to access funds when necessary.Remember, unsecured applications are also unlikely to reap large loan approval, as a home equity loan would, for example. Typically, the interest rate charged is higher while the loan limit is much lower. Usually, lenders are not willing to entertain applications for sums more than $25,000.Approval is only granted on the basis of affordability, which means that applicants need to be full-time employed, have a large income and a very healthy debt-to-income ratio. And when the lender is confident the repayments will be made without a hitch, the modest homeowner loan is approved.Option 3: Cosigner LoanCollateral provides a level of security that can convince lenders that approval is a viable decision. But even when an applicant seeking a homeowner loan with bad credit has no suitable assets, it is possible to find that level of security elsewhere – through a cosigner.A cosigner acts as the guarantor on the loan, promising to make the loan repayments in the event the borrower is not able to. This can be invaluable when it comes to attaining large loan approval despite having a limited income.However, keep in mind that the cosigner has to be perfect in the eyes of the lender, if he or she is to be accepted as part of the homeowner loan application. So, only nominate a person with an excellent credit history and large income.