People having bad credit score often fear about getting a loan. One can definitely get a home loan with bad credit, but he/ she will have to face higher rates of interest than those who have better credit scores. Using modern methods of financing one can now a day easily get home loans. But a few steps required to be followed for that purpose which we have discussed below.
How Easy is it to Get a Home Loan with Bad Credit
Bad credit score : worried
First and foremost thing is that a person with bad credit score must follow is to avoid applying for more credits. Timely payment is very crucial. Revolving credit items should be reduced. These will improve the credit score. Housing payment history will be scrutinized by lenders. So it is very important to have a past record of housing payments without any late payment.
Loan to value factor is assessed by lenders as in lending there is always a risk of default involved. The loans with higher loan to value financing are not available for customers with bad credit scores. The larger the down payment less is a lender’s risk of default. Therefore, by going for a bigger down payment, one can increase the chances of loan approval even with bad credit scores.
Cooperation and high assistance:-
Home sellers play an important role in assisting. Lease option should be properly chosen. A 24-month lease option is quite useful where on paying the rent timely for 12 months one can decide to buy the home. Often the presence of co-applicants strengthens the particular home loan application. Help and assistance from family members who have better credit scores enables to get the home loan quickly. Borrowers going for FHA insured loans enjoy leniency with respect to credit qualifications. It has been noticed that borrowers with bad scores are obtained FHA loans with minimum down payments. The lenders are becoming less strict and in many cases, they often differentiate between irresponsible applicants and people who actually lost their jobs.
There are other ways such as applying with lenders who does not consider credit scores. Here the lender assesses the present and past situations of the borrower and uses the information to assess the application. If the loan amount is more than 80% of the value of property in that case, both the lender and mortgage insurer will have to approve the home loan. So if 20% and other related costs are paid, then the approval by mortgage insurer can be skipped.
This will improve the chances of the loan getting approved by lender. Evidences showing improvement in financial situation are required for making the application stronger. Customers with bad credit scores can also apply to specialist lenders who have their special loan products depending upon the risk element. Professional help can be taken for cleaning the credit report. Instead of applying in several banks and lending institutions it is better to take the help of a broker. They will be suggesting the appropriate lender who will not only approve the application but will also provide the best interest rates.