The effort required in getting mortgage loans with bad credit is not a great as it once was. For those with low credit scores, some simple steps can be taken to improve chances considerably.
The odds on getting a bad credit loan approved is not as long as many people seem to think. While credit scores have an influence, they are never the core reason for rejection. So, even when it comes to getting mortgage loans with bad credit, the applicant has got options for approval.It is true that banks were once almost guaranteed to reject bad credit applicants – especially for loans large enough to buy a house. This was because a low credit score was an indication of the risk involved, so the lower the score, the higher the risk. But today, getting mortgage approval with bad credit is achievable because other factors are more telling.
What this means is that any applicant can be all but sure of guaranteed bad credit mortgage approval if they have been careful enough to set a number of aspects in order before lodging their application.
Be Sure of Your Calculations
The first step is to get your calculations right. It is surprising how often attempts at getting mortgage loans with bad credit are ruined by seeking a sum that simply is not affordable. Lenders are interested in what debts an applicant already has, while often the applicant is focused on how much income is available.
Lenders are ruled by the debt-to-income ratio, a calculation designed to ensure a borrower does not over-extend themselves. Often, it is the unexpected expenses and emergency financial situations that cause havoc with meeting repayments. So, getting mortgage approval with bad credit depends heavily on the ratio.
For example, even with a large monthly income of $10,000, an applicant seeking a small $150,000 mortgage can be disappointed, if the available income does not fit with the 40:60 ratio. For guaranteed bad credit mortgage approval to exist, the monthly repayments cannot exceed 40% of the available income.
Take Control of Your Debts
Whether it is because repayments are late, or loans have been defaulted upon, getting mortgage loans with bad credit is seriously affected by the repayment habits of an applicant. But if there are clear signs the applicant is taking control of debts, then a lender will be encouraged to approve them.
There are a number of ways to do this, with the most logical being to take out a personal loan to consolidate existing debts. Instead of 4 or 5 separate loans with differing interest rates and repayment dates, everything can be made more manageable with one loan. Such a proactive move makes getting mortgage approval with bad credit more likely.
Another step is to take out a series of payday loans, repaying all of them in full and on time. Each loan might only be $500, but with the credit score improved with each one cleared, after 4 or 5 of such loans means the score is improved considerably over a period of 4 or 5 months. While there is no such thing as guaranteed bad credit mortgage approval, this certainly does help.
Make a Down Payment
When getting mortgage loans with bad credit, it is impossible to overestimate the value of a down payment. Not only does it lower the size of the required mortgage, and as a result the size of the monthly repayments, it also shows the lender some valuable traits. Getting mortgage approval with bad credit can sometimes rest on indications, and the financial discipline required to save a large cash sum is a very positive indicator.
Of course, saving 10% of the purchase price (say $20,000) will take time, but providing that kind of down payment can all but ensure guaranteed bad credit mortgage approval. So the effort is well worth it.