Logically, mortgage providers are set to reject applications from bad credit borrowers looking for finance to buy a new home. However, while the chances of success are lower, it is possible to get a home loan with bad credit. Having a strong application, with everything in order, is the key to securing approval.
Of course, there are criteria to meet before anyone can be considered for the loan. With home loans, satisfying the expectations of the lender is important. While easier said than done, there are three key steps that can see the applicants vastly increase their chances of success.
What is worth noting is that securing loan approval despite bad credit is always possible, but compromises may need to be accepted. For example, a poor credit score means higher interest rates, as well as lower loan limits and stricter loans terms.
Check Credit Ratings
Credit scores have an influence (albeit small influence) when seeking home loans with bad credit. It cannot be helped, with the interest rate set by the credit score serving to make the monthly repayments affordable or not.
Learning your own credit rating in advance prepares applicants in making a strong loan application, but there are clearly weak points in the credit history of the borrower. It shows a lender whether an effort is being made to organize debts and finances, and when seeking loan approval despite bad credit, such efforts can be highly beneficial.
Everyone is entitled to seek a credit score review if they feel that the score is inaccurate. This can lead to an improvement, though there is a risk the score might be adjusted the other way and your position be weakened before submitting a home loan application.
Offering a Down Payment
Homes are far from being cheap, and when sums of £200,000 are being considered, pledging a down payment can make a big difference to the chances of approval. When seeking a home loan with bad credit, it is actually essential, with the larger the down payment the better.
The payment effectively reduces the size of the required loan. For example, if a house costs £200,000, a 10% down payment would see the size of the required home loan fall to £180,000. This reduction means a lower interest rate and lower overall monthly repayment, depending on the terms of the loan.
But the financial discipline required to save such a large sum of money is also something that lenders are greatly impressed by. It underlines the commitment the applicant has to securing loan approval despite bad credit. And this is the kind of commitment lenders are comfortable with.
Ignore No Options
Just as with any other loan deal, taking some time to search for the best possible terms is important. Competition in the financial sector means that there are always better deals to be found, especially online. So, getting a home loan with bad credit is certainly possible.
Comparison websites have made the search even easier too, with details on interest rates and repayment schedules presented for quickly and easy examination. So, online is the best place to locate an affordable home loan, but be sure to draw up a shortlist before deciding on which deal.
There is no guarantee when securing home loan approval despite bad credit, but with some careful attention to detail, the best deal for your situation can be identified.