Securing Home Loans With Bad Credit: Some Tips to Help Towards Approval
Mortgages are not easy to get when poor credit history and limited financial resources are features. But getting home loans with bad credit is still possible, with ways to improve the chances of approval.
This is because the key to securing approval despite low credit scores is meeting the set criteria and proving affordability, not in having a high credit score. The scores may have a say over the interest rate charged, but they are not the factors to lose sleep over.
But if bad credit applicants are to take some tips on board that can greatly increase their chances of home loan approval, then it is that accepting compromises can be done while also improving applications through proactive planning. Here are 3 such tips worth considering.
Know Your Credit Status
Learning what your credit status is, and how it got there, is a useful thing when devising an application for a home loan with bad credit. It is all about seeing your application from the lender point of view, and what weaknesses they are likely to pick up on. Then, a clearer strategy to strengthen the application can be recognized.
When applicants know their credit history, and the events contributing to their credit score, it puts them in a position of power. Securing approval, despite low credit scores, is more probable because the specific boxes that need to be ticked can be focused on.
Of course, actually improving the credit score takes some time and effort. Clearing at least some existing debt is the best way of doing this, with consolidation loans the most effective option. With debts cleared, interest rates fall making the home loan more affordable, which in turn, makes approval more likely.
Recognize Down Payment Significance
All too often, the role of the down payment is underestimated. It is not just about sealing the deal, but in lowering the size of the required mortgage. When seeking a home loan with bad credit, this is extremely useful as it lowers the overall debt and the repayments associated with it.
Normally, a down payments of 10% of the property purchase price is expected, but even 90% of the price can be a large sum. The secret to getting approval despite low credit scores is to provide a larger down payment and reduce the mortgage needed.
For example, if a home is priced at $150,000, then a 10% payment sets the required mortgage at $135,000. However, if the down payment is 20%, then the required home loan falls to $120,000. Over 30 years, the difference in repayments can be $50, creating savings of $18,000 over the lifetime of the mortgage.
Take Time to Find the Best Deal
Of course, a hugely important element to seeking home loans with bad credit is to apply to the right lenders. There is little point in applying to one that is known to be unaccommodating, and more logical to seek terms and condition that suit your situation first. This is where some careful online searching becomes necessary, with plenty of competitive deals available there.
Online mortgage providers are known to offer the best terms for bad credit borrowers, granting approval despite low credit scores and individual packages that include lower interest rates and longer repayment terms to ensure the monthly repayments are affordable.
For those seeking to buy a new home, but with bad credit histories and existing debt to deal with, applying for a home loan from an online source is the best possible option.
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ABOUT THE AUTHOR
Joycelyn Crawford is the author of this article. For more information about Easy Loans for Bad Credit and Bad Credit Home Loans please visit her site http://www.easyloanforyou.com