There was a time when suffering the ignominy of a bad credit rating meant life became a little harder. Qualifying for a loan of practically any kind was next to impossible. But, these days such problems can be overcome. In terms of home ownership, there are bad credit home loans available that make it possible to buy a home.
There is no doubt that bad credit means getting a loan approved is more difficult than if the credit rating was excellent. However, nothing becomes impossible and, in fact, getting home loans approved despite bad credit is nothing strange. What matters is not the rating, but a series of other factors ranging from income and employment security to the debt ratio.
Since none of these aspects are necessarily linked to bad credit, there is no actual reason to think that it was ever impossible to get home loans for people with bad credit. All that is necessary is that the criteria is met and the lenders are satisfied the risks involved are minimal.
Ratio is Greater than Rating
One of the most inaccurate perceptions is that the credit rating of an applicant is all important. But when it comes to bad credit home loans, for example, the realities of the financial world are taken into account. These realities inevitably point to the fact that many people with poor credit scores have achieved them through no fault of their own.
What is of much greater interest to lenders is the debt to income ratio. If, for example, an applicant has an income of $5,000 per month, but is paying debts of $3,000, then he is more likely to get home loans approved despite bad credit than an applicant with an income of $10,000 and debts of $7,500.
The reason is that the percentage debt to income ratio is better for the lower income earner, and is therefore deemed better able to handle any new debt. Lenders issuing home loans for people with bad credit rest on this principle more than any other.
Getting Pre Approval
Pre approval is highly useful when seeking to get a mortgage, particularly when considering applying for a bad credit home loan. There are two reasons for this.
First of all, by getting pre approved the challenge of seeking a mortgage from a lender is lifted. The approval is valid with every lending institution, which means every lender can honor the status. However, the problem with getting a home loan approved despite bad credit when a bidding war on the dream home is underway is easily negotiated, giving the applicant confidence to make a bid.
The second reason is that in applying for pre approval, the applicant learns the strength or weakness of their credit position. This can be invaluable as home loans for people with bad credit are more likely to be rejected. By learning what improvements are necessary, the risk of finding the home, then being rejected for a bad credit home loan are greatly reduced.
Knowing the Lender
Of course, shopping around for the best loan deal is important if the the most affordable terms are to be found. Internet lenders tend to have the best record in terms of making a home loan approved despite bad credit. This is chiefly down to the competitiveness of the market, with lower interest rates and bigger sums available.
The problem is that home loans for people with bad credit, just like any other loan, are major investments. So, there is a need to know who the lender is reputable. When agreeing a loan online, it is important to check the company out through the Better Business Bureau.
After this is done, bad credit home loans can be applied for, approved and signed up to with confidence enjoyed in all quarters.