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Why Getting Pre-Approved Home Loans With Bad Credit Is The Wisest Move

It may seem strange that one can secure a pre-approved home loan with bad credit. But there are clear advantages to doing so, from less stress to more manageable terms.

No-one will disagree that securing a mortgage is not always easy, but it is certainly not easy when the applicant has a poor credit history. Approval is less likely, but not impossible and there can be a stressful wait for the green light. What can end this stress? Applying for pre-approved home loans with bad credit is a viable solution.

The advantage is in the title, with pre-approved loans basically meaning the borrower is assured of their funds before actually seeking the item they want to buy be it a car or a home. By securing mortgage pre-approval, the long wait for good news while hoping your dream home is not taken by someone else, is avoided.

But there are other advantages to getting a home loan before actually starting your search or a new home or at least beginning negotiations. And while the process itself is not any shorter, with as many as 90 days required before a decision is made, there are enough positives to make the move worthwhile.

How Pre-Approval Is Different

On the face of it, it may seem that pre-approval is just the same as securing a regular mortgage approval. Well, in many ways it is, but there are some distinctive differences that are worth pointing out before anyone seeks a pre-approved home loan with bad credit.

It is true that the time taken for approval is the same (60-90 days), and that qualification and criteria are the same, but the chief difference is the added freedom that pre-approval provides the home hunter. In essence, securing mortgage pre-approval means the home hunter enters the market knowing exactly how much they have to buy a new home with.

When the home loan is pre-approved, the borrower receives a letter confirming the funds they have. So, when negotiating a purchase agreement with the seller, the letter can be used as a guarantee that the house can be bought.

The Key Benefits

But how exactly does a letter confirming funds are available be of any real benefit? Buying a home has two chief stages: finding the property to buy, and securing the funds to buy it with. The traditional problem is that the seller wants to sell as fast as possible, but the buyer has to wait for confirmation of funds. When securing a pre-approved home loan with bad credit, waiting is avoided.

So, the benefit of securing mortgage pre-approval is that the seller can get the confirmation they are looking for immediately, thus shortening the process from their point of view. This, in turn, means that the risk of losing out to a rival bid is lessened, since there is no window available for other bids to be made.

Another advantage is that it strengthens the negotiating position of the home hunter. With pre-approval, a buyer can promise full payment in a number of days if a certain discount is offered. So, even with a home loan of $200,000, the actual sum paid might be $195,000.

Terms To Look Out For

Of course, even when securing a pre-approved home loan with bad credit, it is essential that the terms offered by the lender are good. With the wrong terms, the cost of the mortgage can become huge.

The first term to pay attention to is the interest rate charged, and the structure of any fixed rate-variable rate agreement. Securing mortgage pre-approval can involve some complicated repayment terms, and these need to be carefully considered before anything is signed.

For example, when agreeing a 30-year home loan, consider the true value of splitting it into a 3-27 structure, with the first 3 years at an affordable fixed interest rate, followed by 27 years at a variable rate. And, always consider the possibility of a longer termFree Articles, to lower the monthly repayments.

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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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