Pre-Approved Home Loans With Bad Credit: A Solution To Bad Credit Home Buying
Getting pre-approved home loans with bad credit is considered a wise move for the bad credit borrowers looking to buy a home. But what are the true advantages this option offers borrowers?
Experts in realty agree that timing is very important when buying property, especially residential property. The smallest delay in securing mortgage approval can end up seeing the property desired lost. For this reason, there are clear advantages to securing mortgage pre-approval.
Getting the home loan needed to buy a new home can be a challenge when poor credit ratings are included in the equation. But there are always ways to make bad credit home buying an easier process and a more enjoyable experience.
How Pre-Approved Lending Works
It may seem strange that a loan as large as a mortgage can be granted in advance of any purchase, but in fact it is a straightforward situation. It is especially beneficial when trying to buy a home with bad credit, and the process of securing a pre-approved home loan with bad credit is far from complicated.
Basically, the process is the same as seeking a normal mortgage, but everything occurs in advance of finding the actual property to buy. The application process still takes between 60 and 90 days, but securing mortgage pre-approval means a letter of approval can be provided by the home hunter.
This letter confirms the size of the home loan granted, and when given to the real estate agent, confirms that the deal can be done. Normally, the agent may accept the bid, but then wait anxiously to see if the bidder is forced to withdraw it.
The Benefits of Pre-Approval
But is going to the lender in advance really as beneficial as we are led to believe? Well, besides the fact that opportunities are less likely to be lost, the chance to get a pre-approved home loan with bad credit puts bad credit borrowers in a much stronger position too.
For example, knowing that a mortgage is already secured means a buyer enters negotiations confident of their financial position. This means that bids and counter-bids can be made quickly. The ability to write a check on the spot, also lends leverage to negotiations.
Of course, securing mortgage pre-approval does not mean the full pre-approved sum needs to be used. If a lender grants a home loan of $250,000, then it represents the maximum sum. If a house is purchased for $200,000, then the interest charged is on $200,000 only. Also, the remaining balance can be used to cover closing and other expenses.
What Terms to Look For
Of course, the terms of any mortgage are key to whether it is a good deal or not, and it would be foolish to think that getting a pre-approved home loan with bad credit is any different. The advantages may help the bad credit borrower to buy a property, but the terms decide whether it is an affordable deal or not.
There are options available that can make a mortgage more affordable, and can make a big difference after securing mortgage pre-approval. For a start, the mix of fixed and variable interest rates can make the early repayments more manageable.
For instance, a 2-28 home loan sees the first two years of a 30-year mortgage charged at a fixed rate, thus allowing for better budgeting. Some lenders also offer a 5-25 structure, or even a 5-30 deal for a 35-year mortgage.
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ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com