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Securing Home Loans With Bad Credit: A Few Tricks To Help

Applicants face extra challenges when seeking a home loan with bad credit, but credit scores do not dictate the mortgage approval process. There are even some tricks that can help in securing approval.

When people with poor credit ratings begin their search for a new home, the challenge is not in finding the property they want, but in getting the financing needed to complete the purchase. Getting home loans with bad credit does throw up some hurdles, but it is important to realize they can be secured.

The effect of the poor economy and the increases in job losses means that even the most honest borrowers have been adversely affected, so securing mortgage approval is not easy for anyone. However, meeting the set criteria is the key to getting the green light.

But with the knowledge that not everyone with bad credit is financially irresponsible, the scores themselves mean little when applying for a home loan. With other factors having a greater influence, like income and debt-to-income ratios, these are what really matter. But there are some steps to take that can help the cause greatly.

Make A Large Down Payment

The significance of a down payment should not be underestimated, and if a large one can be made, then it can play a big part in securing a home loan with bad credit. The reason is simply down to the size of the mortgage required to complete the purchase.

For example, the usual down payment is 10% of the purchase price, leaving the applicant with the task of securing mortgage approval for the remaining 90%. But if the payment is 20%, then there required mortgage is 80%. With a $200,000 property, the size of the down payments are $20,000 and $40,000 respectively.

There are other advantages to making a larger down payment than just helping to secure the home loan. For a start, any share of the property not covered by the mortgage is home equity, which is useful collateral to have. Also, lenders are impressed by the financial discipline an applicant shows by saving a large cash sum.

Consider Your Options

Jumping to sign the first mortgage deal offered is not a wise move, so it is important to shop around to see your options before carefully considering them. The best thing to do is search the Internet, since it is here that getting home loans with bad credit is most likely.

The reason is that online lenders and mortgage providers are recognized experts in bad credit lending, and their mortgage packages are designed for bad credit borrowers. And since they welcome bad credit borrowers, securing mortgage approval is much easier there too.

However, it may be worthwhile contacting your own bank, especially if your relationship with them is good. In these cases, the lender already knows the applicant and their repayment habits, so better home loan terms can be secured.

Choose a Long Repayment Term

Finally, when agreeing terms with a mortgage provider, it is worth choosing the longer repayment term. The reason is that, when seeking home loans with bad credit the terms of the mortgage is not going to be great, with interest rates will be higher. However, the longer term makes the deal more affordable.

Basically, the longer the term, the greater the number of months involved. And the more months involved, the greater the number of shares the principal owed is divided into. For example, with a $100,000 mortgage, a 20-year term sees the principal divided into 240 shares ($417 per share/month), but over 30 years, it is divided into 360 shares ($278 per share/month)

Lower monthly repayments makes securing mortgage approval easier, but bear in mind that each month interest is also paid. So over a longer term, the amount of interest paid is greater. For most applicants, thoughFree Web Content, getting the home loan approved is the priority.

Article Tags: Securing Mortgage Approval, Home Loans, Securing Mortgage, Mortgage Approval, Home Loan, Down Payment, Divided Into

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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

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