Securing Mortgage Loans With Bad Credit and No Down Payment

The challenge of securing a mortgage loan with bad credit is pretty big. After all, lending to bad credit borrowers has its risks for lenders, but such large sums as mortgages is a major risk. But what about granting a 100% mortgage to a bad credit borrower? Surely, that is too much to ask.Actually, it is not too much and an increasing number of mortgage providers are opting to grant mortgage approval with no down payment. It is not easy to secure, with the criteria and conditions that lenders have set ensuring that not everyone can qualify for the advantage.But the fact is that, with a suitably strong application, it is possible to get a mortgage loan that covers the entire purchase price of a new home, even when the applicant has a poor credit history or is in a tight financial situation.The Problem With Down PaymentsThere are great advantages to providing a down payment when applying for a mortgage loan with bad credit. Normally, it represents 10% of the purchase price, but that can be a very large sum of money to get together. For a property worth $200,000, that means a sum of $20,000.The advantage is that, with a down payment, the required mortgage falls to $180,000, which translates to a lower debt, a lower monthly repayment and an altogether more affordable deal. But while approval with no down payment means a more expensive deal, it also relieves the pressure of saving $20,000.Of course, getting a 100% mortgage loan also means that the borrower has no home equity to speak off at the start, which leaves them vulnerable at least for the first few years. A down payment allows the borrower some room to maneuver when time gets tight.Accept Costly CompromisesBut why would a lender take on the entire risk associated with purchasing a property. Well, it comes down to the element of risk against profit. Often a lender is willing to grant a mortgage loan with bad credit that represents 100% of the purchase price but charge very high interest. If this is affordable and acceptable to the borrower, then a deal can be done.It is possible to get an approval with no down payment, but applicants need to be willing to take the hard road to complete ownership. Depending on the lender, a high rate of interest can be charged for an initial period. For example, a high fixed rate for the initial 5 years, after which time the rate changes to a lower variable rate.There is little doubt, of course, that saving a down payment is a wiser course of action, but this takes time and it is not always possible. If a mortgage loan even for 100% of the cost of the property is affordable, then it may be the best course open.Search For Best Mortgage OptionsBut there are always options available to a borrower, and it comes down to choosing the one that is most suitable. It is always important to seek the best terms when applying for a mortgage loan with bad credit, but it is worth considering that refinancing deals are possible in the future.Maintaining repayments on time helps to improve credit scores, and after a few years, there is the possibility of renegotiating the mortgage to lower repayments and make the whole deal more affordable.In this sense, approval with no down payment is not necessarily the expensive option - though it is initially. Refinancing the mortgage loan makes the early financial pressure all worthwhile.