Getting A Mortgage Loan With Bad Credit: 3 Factors That Can Make A Difference

There was a time when having a poor credit history was enough to ensure rejection when seeking a mortgage. These days, most lenders have a more open attitude, though this is mainly because the number of people seeking mortgage loans with bad credit is higher than ever before.But, even with mortgage providers showing an increased willingness to grant mortgage approval despite poor credit scores, there is no guarantee that they will give the green light. Applicants need to help themselves by preparing a strong application, and this means some careful pre-planning needs to be done.So, what are the key elements in a mortgage loan application that establishes it as strong enough? And what are the specific facts that mortgage providers look for when assessing them. We have put together a shortlist of 3 of the most significant that every applicant should take a careful look at.1. Can Your Bad Credit Rating Be Improved?The issue of bad credit scores is not the most significant in any loan application, but there is no denying that lenders do take an interest in them – especially in how a low score might have been secured. When seeking mortgage loans with bad credit, they are more likely to want to know if the low score was achieved by poor money management, or by bad luck.The difference is that poor money management means repayment obligations were largely ignored, while bad luck means that circumstances made meeting the obligation too difficult - for example, wasting money on fast cars and gadgets versus becoming redundant for a period.The latter scenario tends to make approval despite poor credit scores more possible. But improving the scores will help increase the likelihood even more. Clearing existing debts through a consolidation loan can make a hugely positive impression, as well as ease the interest rate structure the lender is likely to charge on the mortgage loan.2. Contribute A Larger Down PaymentThe purchase of a home is rather complex, but in its simplest terms, a down payment allows the buyer to seal the purchase deal. However, when applying for a mortgage loan with bad credit, the significance of the down payment is increased as it can lower the size of the required loan, thus helping to make the debt affordable.Most realty agencies expect anything from 5% to 10% of the purchase price to be paid in a lump sum, which can mean as much as $25,000 has to be to hand when a property is found. But with as much as 95% remaining, approval despite poor credit scores can be too much to expect.But by increasing the down payment to perhaps 20%, the size of the mortgage loan is lowered, and the chances of success are increased. After all, looking to borrow $160,000 on a $200,000 home is more likely to be acceptable than borrowing $180,000.3. Consider Building An Investment PortfolioHaving a portfolio of investments can have a practical advantage when applying for a mortgage loan with bad credit, with the availability of assets suggesting there is financial backup should any difficulties develop.For example, an applicant with some government bonds can cash them in if they find themselves under pressure to meet mortgage repayments. So, granting mortgage approval despite poor credit scores is not seen as such a huge risk.However, it does take time to build a portfolio, so begin building one at least 3 years before the application for the mortgage loan is to be submitted. This is usually the time when saving for the down payment begins anyway.