There is no such thing as a home loan application with bad credit that is guaranteed to succeed. Of course, no one is foolish enough to think that there would be, but what many people might not be aware of is that it is possible to greatly improve the chances of success by following some simple tips.
The fact is that bad credit ratings, though not of any particular help in the application process, are not the fatal blow to an application that we are led to believe. All that is really needed to secure home loans with bad credit is for the ratings to be improved a little, for a down payment to be made, and for the basic criteria to be met.
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However, there are some other things that can be done to improve the chances of getting approval on home loans despite bad credit. Information is particularly important since securing that loan depends on strategy as much as it does on anything else. Through a few simple tips, your application can be made more acceptable to any lender.
Check Your Credit Rating
The first thing that anyone considering applying for a home loan should do is check what exactly their credit rating is. This is important for two reasons. Firstly, the strength of the application can be accurately gauged, and appropriate steps can be taken and, secondly, the entitlements and terms that are available can be assessed.
In most cases, applicants seeking home loans with poor credit simply fill in the application form, detailing their income, loan amount desired and existing debt, and hope for the best. These applications are almost certain to be rejected. But if the credit rating is known, then it provides an opportunity to take the necessary steps to strengthen the application.
Meanwhile, the terms of the home loan can be assessed before wasting time trying to win approval on home loans despite bad credit. For example, getting a low interest rate mortgage is highly unlikely if the credit rating is very low, so applying for one is pointless.
Steps to Improve Credit Rating
Once the rating is known, it is possible to strategize a way to improve it before making the application. There are several things that can be done. For example, a series of small personal loans can be taken out and repaid quickly to increase the credit score.
After all, a $1,000 loan is not difficult to repay over 3 months. Over the course of a year, maybe 3 such loans can be taken out and repaid, with each loan repaid fully improving the score. So when it comes to actually applying for home loans with poor credit, the credit history is more impressive.
Another idea is to take out a larger debt consolidation loan, thereby clearing existing debt and confining it to one manageable repayment. Lenders are happy to see this done as it reflects a pro-active attitude towards properly managing a difficult financial situation. This can help greatly in getting approval on home loans despite bad credit.
Get a Cosigner
However, one of the most convincing steps to take is to include a cosigner in the loan application. The advantage is that the cosigner agrees to pay the mortgage if the borrower should have any difficulties. This means that the lender can be confident repayments on the home loans with bad credit will be made one way or another.
Luckily, it is possible to get approval on home loans, despite bad credit, even without one, as long as the down payment is large, the credit history shows signs of improvement, and the income of the applicant is large enough to cover the loan repayments.
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