Securing Home Loans With Bad Credit is More Certain Than Many Think

There was a time when the idea of securing a home loan with bad credit was considered a fanciful dream. With the size of the debt and the low credit score, lenders were easily put off. But those times have largely changed, and while not every lender embraces bad credit borrowers, it is nonetheless easier now to secure loans.Lenders have to lend money if they are to make a profit, so there is always a window of opportunity for bad credit borrowers to seize upon. And, the good news is that the secret to securing mortgage approval with a poor credit history is not that difficult to achieve.But, as with all financial deals, it is important to meet the set criteria and maintain a realism in the home loan application if there is to be any chance of getting the green light and securing the funds to buy the new home.The Influence of Low Credit ScoresWhile bad credit is not the destructive element that sees loan applications fail, there is still every reason to note the influence it does have. The influence is negative, but it is restricted to the size of the interest rate to be charged. As long as the repayment sum is not too high, then getting a home loan with bad credit is still on the cards.If a credit score is very low, then the interest rate charged will be higher. This means the monthly repayments will be higher too, and it is the size of the repayments that make most difference to the application. In fact, securing mortgage approval is dependent on affordability, regardless of the size of the income earned by the applicant.What is significant about a bad credit score, is the reason for them. In many cases, honest borrowers have fallen victim to the economic crisis, and lenders recognize them as trustworthy borrowers. Those with a history of poor money management find getting a home loan difficult.Securing Loan ApprovalSo, what can be done to increase the chances of securing a home loan with bad credit? There are just a few things to do that can strengthen the application and turn it into something that might be deemed attractive, like making a large down payment or improving the credit score.The down payment is far more influential a factor than many give credit. The larger the payment made, the lower the mortgage loan needs to be and, in that respect, the more money it saves in the long run. With a large down payment, of perhaps 15%, securing mortgage approval becomes much easier.Improving the credit score lowers the interest charged on the home loan. This can be done by clearing some of the existing debt, with a consolidation loan the most practical method. It means all of the debts are combined and repaid with one loan, and with each debt repaid, the score increases. It also vastly improves the debt-to-income ratio.More Than Just MoneyThe secret to getting a loan approved is not down to the fact and figures that can be proved. A lender needs to feel confident that the loan will be repaid, so granting a home loan with bad credit is often based on faith in the borrower.But if the right steps are taken then the lender will certainly feel good about the applicant. For example, if a larger down payment is saved, it proves the applicant has the level of financial discipline needed to taken on a mortgage.If the lender feels confident then securing mortgage approval becomes much easier, even if the figures are not particularly strong. Still, when budgeting, remember to consider the costs of running the home too, so the home loan does not become a millstone around your neck.