The thought of owning your own home is very appealing to everyone. It’s an significant part of the American Dream, after all. Is it however possible to qualify with bad credit for home loans? What steps do you need to take to ensure that you, despite your poor credit situation, can find the financing you need for your home? The article will analyze three additional critical factors which can make all the difference in your ability to find a poor credit home loan. Learn more about mortgage lenders.
Factor # 1: Down Cash
If you have bad credit, when you can offer a large down payment, home loans will be much easier to get by. A good thumb rule is to save at least 20 per cent of your home’s total purchase price. The impact a large down payment has on your ability to find a bad credit home loan is double:
- It reduces the principal amount of the loan.
The more cash you need to offer the bank, the less money they need to provide you with in a home loan. This means you’ll be more likely to qualify for the home loan you want as it’s for a smaller sum. Your bad credit will continue to be a factor, but the lower principle will make the bank or lender risk less.
- It shows you’ve got your ways reformed.
Because of two factors many people develop bad credit: too much expenditure and/or not enough income. That is, bad credit is often the product of outstanding debt defaults and late payments. Although it’s easy to fall into tough times and accumulate bad credit, it’s much harder to recover from a poor credit score-especially if bankruptcy is involved. Providing a large sum as a down payment on your home loan will therefore prove to a lender that you have become financially more responsible. It will go a long way in assisting the lender trust that you are willing and prepared to take responsibility for a home loan.
Factor # 2: The expense of home
Again, in this section, there are two main factors that will impact the decision of a lender to grant you a home loan. The sum you pay for the house you want influences the ability of the lender to help you out. Obviously the lower the house cost, the lower the loan required. Negotiating a lower purchase price or looking around to find a house with the price of the idea will give a lender a glimpse of how serious you are about loans. Know your limits, and stick to them.
Cost is also important because of a bit of what is called equity. Most of the people who were burnt in the housing bubble bust of the late 2000’s had to foreclose on their homes because their mortgage payments were underwater. That means the house ‘s value was below the amount they owed in the loan. Making sure you negotiate the price and get an independent appraisal on the home that you want to purchase will help you avoid the same fate.
Factor # 3: Best Lender selected
The last thing you need to remember when applying for a poor credit home loan is who lent the money to you. Traditional banks and local credit unions are generally less likely to work with credit-probleming borrowers. So online lenders are a better bet.
Make sure you ‘re shopping around for your home credit, talking to 3-5 different online lenders to get the best price. These lenders are generally specialized in bad credit lending, and can easily help you find a bad credit home loan.