Securing Home Purchase Loans With Bad Credit Carries No Guarantee

Securing a home purchase loan with bad credit is something of a challenge. The loan itself creates a major debt, and one that will require decades to repay, while the pressure to maintain an income these days is increased by the uncertainty in the economy. So, what chance is there of getting any kind of guarantee of approval?The simple truth is that there is no such thing as a guarantee in the world of finance, so expecting to find a lender offering guaranteed mortgage approval is a fantastical fancy. However, the chances of getting approved at all does come down to practical matters, and ones that, with the right steps, can be improved by applicants.Remember, bad credit is not the death knell that people think, so even with a poor credit history, it is possible to secure a home loan and purchase the home that is desired - though admittedly, only if the price is realistic.The Problem With GuaranteesIt might seem that a guarantee could be a genuine offer to certain applicants, but it is a foolish promise for any lender to make when the economy and markets can change so quickly. Offering home purchase loans with bad credit is risky enough, without opening the door to applicants with insufficient income and poor repayment habits.The real problem is that by offering guaranteed mortgage approval the lender is not distinguishing between trustworthy and untrustworthy applicants. Even someone with a poor credit history can be trustworthy, if their score has been affected by outside influence.However, the good news is that some home loans are easier to secure if the applicant meets a specific minimum credit score. It is no guarantee, with debt-to-income ratios and employed status important factors, but it is a significant boost to approval chances.Down Payments and SecurityGetting a home purchase loan with bad credit not just reliant on income, though it is obviously extremely important. There are some factors that, when taken into account in advance, can make approval much more likely. These centre on reducing the debt and reducing the risk for the lender.A down payment, for example, can reduce the size of the mortgage required, which means a lower debt, a lower monthly repayment and, therefore, a more affordable loan. Usually, down payments are 5% or 10% of the purchase price, but increasing it to 15% or 20% when buying can all but ensure a guaranteed mortgage approval.Security is not usually possible for a home loan, though the property itself is claimed if the mortgage is defaulted upon. But getting a cosigner greatly reduces the risk the lender faces, with a guarantor promising to make the repayments if the borrower cannot. The result is lower interest rates and, therefore, lower monthly repayments.Plan for a Mortgage Refinance ProgramIt might sound cynical, but it is worth considering the many mortgage refinancing programs as a future financial option. Many people are securing home purchase loans with bad credit knowing that in 4 or 5 years, they can refinance the deal to lower the repayments.The programs involve buying out the existing mortgage balance with a new mortgage, but over a longer term and at a lower interest rate to reduce repayments, and ultimately save money.Of course, the chosen lender makes the key difference, and while there is no such thing as guaranteed mortgage approval, lenders are happy to refinance a deal if the terms are good.But it is important to first establish a reputation as a reliable borrower before the home loan refinancing deal can be considered any real advantage.