As many potential home buyers are aware, a person or couple's credit history is one of the most important factors considered when a bank decides to grant a home loan. With a poor credit history, that is, one that includes late payments, defaults, bankruptcies, CCJs, etc., finding any loan is difficult, not to mention a home loan. Therefore, people in such a situation need to look beyond traditional lending options and instead search out a bad credit home loan.
What Is a Bed Credit Home Loan?
Typically, home loans that are given to borrowers with poor credit are given with some important terms. The first, and most damaging, is a higher interest rate. Also, these loans also will carry much tougher terms in the case of late and missed payments. Fees may be higher and penalties stiffer if the borrower with bad credit should not be able to fulfill his loan obligation.
In these cases, taking a true and detailed stock of your current financial position and comparing the offers of several bad credit lenders are essential. Getting a home loan with bad credit is certainly possible, but the path towards doing so can be tricky.
Pleading Your Case and Getting a Loan
Not all borrowers with poor credit are created equal. In many cases, the circumstances that led to the drop in your credit score are out of your control. Depending on this situation, the process of getting a home loan can be much easier. However, you will need to be honest with your lender about why your credit is poor and what steps you have taken in order to remedy the situation. A sudden job loss, for example, can hinder one's ability to repay loans, but once you are back to work and earning good money, the same circumstances are not in place and you become a better loan candidate.
In that same breath, you will need to prove to the lender that you have the financial ability to repay the home loan you take. This can be accomplished in a number of ways. First, you must obviously go through the typical loan application process. You should also draw up a detailed budget that shows how much money you will have free each month so that you can repay your loan. You may also consider gathering letters of recommendation from colleagues, bosses, etc. that attest to your reliability and responsibility. Basically, you want to go to whatever lengths necessary to prove that you are able to repay your home loan, even though you have bad credit.
Home Loan Comparison
The other important step that you need to take in getting a home loan with poor credit is to comparison shop for the best deal. Generally, traditional banks and also credit unions will not be very keen to work with you if you have bad credit. Home loans are therefore easier to get online through bad credit lenders. However, not all online lenders are created equally, so you will need to be sure to talk to several different agencies as a means to compare the deals that they offer.
Once you have all your offers laid out, look at the fine print of each loan. Notice not only big numbers like principles and interest rates, but also notice fees, penalties and other terms. Once you lay all of the details side-by-side, the best lender will be easy to spot.
You Can Get a Home Loan with Bad Credit
Though the process is certainly not as straightforward as many would like, to get a home loan with a poor credit history is certainly possible. Make sure that you are prepared to talk to not just one, but several lenders and that you are ready to take on the responsibilities of owning your own home.