To buy your dream home, you need to first get pre-approved for a home loan. With bad credit ratings, it can be next to impossible to qualify for the loan. Home loan restrictions are tougher than ever today, mainly down to the massive bank bailouts and rising cases of foreclosures. Obtaining a loan is no longer as easy as it once was. However, you can still manage to be approved even with your bad credit score, if you are a bit proactive and smart in your proceedings. Here is a guide for getting home finance with less than perfect credit score.
Check credit history
Before starting to look for a home loan, take the time to evaluate your credit history. Your credit score might not be as bad as you initially perceived. A score below 620 is considered bad; however, a score over 620 and below 680 can at least get you qualified for a home loan.
Improve credit score
Before rushing headlong to make any overtures, take the time out to improve your credit score. Start by clearing your pending bills, paying outstanding debts and change your account to a current one. Steadily, improve your credit score to make your home loan more affordable. Before signing any contract, have your attorney to take a personal look at it and update you on the intricacies involved.
Try your level best to make a large down payment on the home. The more money you manage to put on your home, the more favourable will be the terms on the loan, irrespective of your past credit score. If you are unable to make down payment of at least 10% of the value of the home, you will be required to pay additional charges on home insurance, which will radically increase your monthly payment.
Contact mortgage broker
There is too much complex jargon associated with loans, which can be beyond your comprehension. Contact an accredited mortgage broker and inquire with them about the finance requirements and documents needed to qualify for the home loan. Your loan application will be processed on three distinct categories - your current income, credit ratings and ability to repay the loan. The job of your mortgage broker is to guide you through all the intricacies involved and make sure your loan application is sanctioned.
Shop around for lenders; a bank might burden you with a ridiculous interest rate, especially with your bad credit history. Search online, shortlist the companies that commands good reputation in the market. Read the information given on the company's website; determine if the company will be willing to work with people with bad credit score.
Applying for loan online is easier than ever today. Fill in the easy application form with required details and submit it. Once the application is processed, the loan provider will contact you directly to further discuss on the loan. If everything goes well, your loan amount will be sanctioned even before you realize it. Be prepared to pay staggering high interest rate. Keep an eye out for closing costs, points, penalties and other hidden charges, when deciding on a loan.
Thorough research and careful planning is all that it takes to get the loan that fits your budget.