Mortgage Loans With Bad Credit: The Secret to Getting Loan Approval

Much as it might seem that applying for a mortgage loan with bad credit is a futile exercise, the possibility of approval is much higher than generally expected. The fact is that factors other than credit scores are more influential in the application assessment process.This is a useful fact to keep in mind. But as is the case with all loans, getting loan approval is impossible if the right boxes are not ticked. In this case, there needs to be attention paid to issues like income and the income-to-debt ratio, to name just two.There is a secret to enhancing the effectiveness of a mortgage loan application, and making it as close to what the lender is looking for as possible. Here are three such secrets which, if an applicant sets about addressing, can result in the thumbs up from the lender rather than the thumbs down.Income and Debt-to-Income RatioAs already mentioned, these are two of the more influential aspects of any application for a mortgage loan, with bad credit scores taking more of a back seat. Of course, income seems only logical, but it is not the size of the income that really matters. What matters is how much of it is free to use to repay the new mortgage.For example, if an applicant has a monthly income of $10,000 but has monthly obligations of $8,000, then getting loan approval on a mortgage of $250,000 is highly unlikely. This is because the debt-to-income ratio recommends only 40% of the income should be dedicated to repaying debts, so that enough is left over to cover emergency expenses.However, someone earning $5,000 per month could be approved for the same mortgage loan if 40% of their available income is enough to meet repayments. If their outgoing are just $2,500, then with $2,500 free to cover a mortgage repayment of maybe $1,400 per month, approval is likely.Save For A Down PaymentThere is no denying that getting together a large lump sum as a down payment is not easy. But when applying for a mortgage loan with bad credit it can be worth the effort. In fact, it can often prove the difference between success and failure.This is down to two simple things. Firstly, lenders are always impressed by the degree of discipline typically needed to save large sums over a relatively short period of time. A 10% sum for a $250,000 home is $25,000, which requires $1,000 put away every month for two years. Since getting loan approval depends on convincing lenders to trust in the borrower, this is excellent proof.Also, the size of the down payment reduces the size of the requires mortgage loan, which in turn reduced the sum of interest (not the rate), and monthly repayments. Saving $100 per month on a 30-year mortgage translates to savings of $36,000 of the lifetime of the mortgage.Show An Improved AttitudeFinally, when applying for a mortgage loan with bad credit, showing lenders that the reasons for getting a low credit score in the first place are no longer relevant also helps. If a bankruptcy ruling is in your past, show that your money management is now up to scratch. If overspending was a trait, show that saving is now a priority.Of course, saving a down payment helps in both those respects, but it confirms that getting loan approval takes longer to secure than filling out a form and waiting 24 hours. It can take a year or more. So, build a savings account balance from nothing, and convince the lenders that a mortgage loan is in safe hands.