Home Loans With Bad Credit: Making Approval A Realistic Prospect

The size of a typical mortgage is significant, with many of them more than $200,000. It means that for most of us, our home is the most valuable asset we have, and the mortgage we pay is the biggest debt we take on. But can bad credit borrowers secure the kind of funds needed to buy their home? Thankfully, it is possible to secure a home loan with bad credit.It might seem strange that a lender would trust such a large debt to someone with a poor credit history, but the economic reality dictates that lenders have a more open view when considering bad credit applicants. With that in mind, more are willing to grant mortgage approval with poor credit ratings, though the terms are not ideal.There are, in fact, just two key conditions that mortgage providers consider important during the approval process. These are that the repayments are affordable, and that the source of income is reliable. Once these two are satisfied, then the likelihood of securing a green light on the home loan application is much more likely.How Significant Is Bad Credit History?Getting a home loan with bad credit may be possible, but with low credit scores involved, how is this possible? The reason is that the significance of a bad credit history is not that great when it comes to loan applications. In fact, it really only influences the interest rate structure to be charged.The basic idea is that the lower the credit score, the higher the interest rates, and it is this factor that can result in the mortgage being deemed too expensive. Even so, getting mortgage approval with poor credit ratings is possible if the repayment structure is flexible enough.It also means that by spending some time improving your credit score in advance of applying for a home loan, the interest rate can be lowered. This is helpful, though the key factors affecting the approval process surrounds affordability and the reliability of the source of income.Key Mortgage Approval FactorsAs mentioned, affordability is the key word when it comes to securing home loans with bad credit. But establishing this is dependent on the amount of excess income that exists. And with the debt-to-income ratio confining repayments to 40% of income, that is a hugely important factor.  Excess income is how much of the monthly income is left over once all of the existing monthly expenditure is accounted for. So, even with a large income, having a large amount of existing debts makes getting mortgage approval with poor credit ratings is unlikely.The best way to improve affordability levels is to clear existing debts, which is why taking out a consolidation loan can be of huge benefit. The repayments on a single loan can be much lower than the existing repayment, thus freeing up more cash to cover repayments on the home loans.Mortgages Even For RentersEven renters who have little in the way of establish assets can secure a home loan with bad credit. In fact, long-term renters are generally believed to face a tougher task than bad credit borrowers. However, the options available are quite competitive.Having a confirmed history of paying rent on time is a hugely valuable element, since it effectively shows a commitment to meeting a financial obligation. As a result, securing mortgage approval with poor credit ratings becomes a real possibility. When submitting an application, it is necessary to provide photocopies of your rental book and even a letter from your landlord.However, remember that approval is dependent on the home loan being affordable more than anything else.