In comparison to other forms of financing, it is generally more complicated to acquire a home loan.
This is simply because a home loan or mortgage involve a huge amount of financing. And many lending companies have very strict requirements when evaluating applications.
What most lenders prefer
In fact, most lenders prefer customers with a good – excellent credit rating. A high credit score is a evidence of the customer’s ability to pay back the borrowed funds and knowledge in managing credit. If you possess an excellent credit score, you’re going to be in a greater position to get a home loan with a low interest rate.
On the other hand, borrowers with bad credit history may find it more difficult to get approved for mortgage loans. First, not all lending companies offer bad credit home loans so you need to look for lenders that offer special mortgage loan programs. Remember that submitting your application to the wrong lender may cause your loan to get rejected and a rejection can do more damage to your rating.
Bad credit home loan mortgage
You can use the internet to find lenders that offer bad credit mortgage loans. However, if you have a record of bankruptcy, lenders may decline your loan application. If your debts have been discharged through bankruptcy, you may need to wait for at least two years before you can apply for a mortgage loan.
There are many factors which can lead to bad credit and if you can speak with a prospective lender about the circumstances behind your credit history, you might be able to get an approval. For example, if your bad credit was caused by an unexpected loss of job, divorce, or sickness, a lender may consider your mortgage loan application, especially if you can explain the steps you’ve done to improve your credit.
Higher interest rates
Bad credit mortgage loans are expected to carry much higher interest rates than regular loans. Nevertheless, this does not mean you should settle with unreasonable loan deals. Despite having bad credit, you should be aware of your rights. Protect yourself against predatory lenders who may try to take advantage of your situation.
You might be able to reduce the interest rate of your bad credit loan by submitting a higher amount of down payment. If you can provide 15% to 20% of down payment, you should be able to reduce your monthly loan costs.
Monthly income
Your monthly income is another factor that can affect the interest rate and monthly loan cost. If you can show proof of a stable income, a lender will be more confident to offer you a better loan deal. If you have just been hired by a company, you may need to wait until your work status becomes stable before applying for a home loan.
Once your bad credit home loan is approved, see to it that you can submit your monthly loan payments on time to improve your credit score. Prepare to apply for bad credit home loan refinancing as soon as your credit score improves to reduce your payments.
Choose a legitimate lending company. Furthermore, see to it that you will be able to pay back your loan in full and on time to avoid the fees.