Securing Mortgage Loans With Bad Credit Is Less Troublesome Than It Seems

There is no simple way to get a mortgage. The amount of money involved is too high for lenders to ever be flippant with the topic, and lending policies these days are too strict to allow just anyone be to approved. But it is still possible to secure mortgage loans with bad credit, as long as some compromises are accepted.  Experience has taught us all that lenders are cautious creatures, and so securing any kind of loan requires some effort in convincing them that their investment is safe. However, there are crucial factors that can swing the fate of an application and can make mortgage approval with poor credit histories possible.But what are these factors? And how can a bad credit applicant seeking a mortgage loan really expect to get the green light when they have obvious financial difficulties. Well, it comes down to the mortgage providers approached, and proving the mortgage is affordable.Approaching the Right Mortgage ProviderThere is more than one source for a mortgage, and when seeking a mortgage loan with bad credit, it is important to check out the range of options that are available. While many of the mainstream lenders might be willing to take on the risk, they will inevitably charge much higher interest.The alternatives to banks are online lenders and subprime lenders. While neither of these options are going to be cheap, mortgage approval with poor credit histories is much more likely with them because of their expertise in bad credit lending.Subprime lenders, for example, are known to charge higher interest rates, but they also agree longer loan terms thus making the monthly repayments more affordable. So, by granting a $200,000 mortgage loan over 40 years, as much as $150 is saved each month. However, over the lifetime of the mortgage the interest paid is much more.Proving AffordabilityPerhaps the biggest challenge is to prove to a mortgage provider that the particular mortgage is affordable. The problem when applying for a mortgage loan with bad credit is that the issue of low credit scores suggests an inability to regularly meet repayment obligations.However, with the right terms secured, it is possible to prove that the repayments are affordable, so the likelihood of defaulting on the mortgage is low. Interest rates and income are important in this calculation, but the biggest issue is the debt-to-income ratio. If that is in a good state then mortgage approval with poor credit histories is possible.The ratio is strictly adhered to by lenders, and states that a maximum 40% of available income can be used to make repayments. It means that should there be an excess income of $1,000, then repayments on the mortgage loan can be no more than $400.Other Worthwhile FactorsThere other factors that can greatly aid the cause when seeking a mortgage loan with bad credit. If ensuring affordability is important then making a larger down payment than normal is an ideal move.Normally, a payment of around 10% is expected to essentially seal the deal, but increasing this to 15% or 20% means the size of the required mortgage is reduced. And with the size of the debt reduced, the chances of securing mortgage approval with poor credit histories are increased.For example, a home worth $200,000 will require a mortgage loan of $180,000 if a 10% down payment is made. But a 20% payment reduces the required size to $160,000. This can mean savings of $100 per month, which accumulates to $36,000 over 30 years.