Poor credit history is supposed ruin any chances of getting home loans. But in fact, getting a home loan with bad credit, and even getting it pre-approved, is not so impossible at all.
There can be little doubt that purchasing a home is the biggest transaction a person is likely to ever complete. By extension, a home loan is the biggest debt that a person will find themselves in. With hundreds of thousands of dollars in the equation, getting a lender to approve a home loan with bad credit is surely impossible.
But, the chances of getting just such a home loan are not as impossible as it might seem. In fact, it is even possible to get pre-approved home loans, despite bad credit. Once the criteria for such loans is satisfied, the ability to get any loan exists.
With regards bad credit, lenders recognize a difference between bad credit due to a sudden change in financial circumstance, and bad credit due to irresponsible financial habits. For that reason, bad credit is not always seen as so bad, resulting in bad credit home loans getting pre-approved.
What is a Pre-Approved Loan?
In essence, a pre-approved loan is where an application has been made and approved, but the funds are released until necessary. This system is most used by house hunters who are seeking to buy a new home. A home loan with bad credit can take quite some time to be approved, and time is of the essence when hunting for property.
The fact is that when a house is found, a bid cannot be made until the house hunters know how much they can offer. By the time they have applied and learned their fate, the house could be taken by someone else.
Getting pre-approved home loans, despite bad credit, is the only way around the issue as it allows the hunters to make a bid immediately. The money may not be in their account, but they know what they can get. So, with bad credit home loans getting pre-approved the dream home will not be lost due to any delay.
Getting a Pre-Approved Loan
The process of getting a pre-approved loan is not really any different from getting any other loan. A bad credit home loan will require some strict criteria, with proof of employment, proof of income and an active bank account from which repayments can be drawn, all required.
In order to secure a pre-approved home loan, despite bad credit, an applicant needs to simply go through the normal applications procedure, gain approval and be issued with a document by a lender stating an agreed sum will be issued to the borrower.
Of course, if no house is purchased, then no money is issued to the borrower, but with bad credit home loans, getting pre-approved means the borrower has the confidence to make an offer for the property.
Patience is Necessary
It is worth noting that getting a home loan with bad credit requires more that just a 24-hour call back. Some lenders will only issue an approval after 90 days, during which time the lenders search the credit and banking history of the applicant in great detail.
This is because in assessing the wisdom of granting a pre-approved home loan, despite bad credit, the lender is basically ignoring the credit score and concentrating on the financial habits of the applicant.
With the process taking such a long period of time, there is little chance of purchasing a home unless the pre-approval has been secured. When attaining a bad credit home loan, getting pre-approved is essential if it is not to be a wasted effort.
And of course, a home loan with bad credit is a major financial commitment, so getting it right the first time is important.
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