Homebuyers who are looking to get a home loan with bad credit often feel like they are fighting a losing battle. Agreeing to take on a home mortgage is a major undertaking for most people and will constitute the largest loan every extended for 99% of the population. Therefore, the problems that one encounters when searching for such a home loan with bad credit should not be diminished. However, that is not to say that success is impossible.
In fact, there are three simple strategies that you can employ starting today that will greatly increase your chances of receiving a home loan with bad credit. If you take the time to employ these strategies, you will be able to purchase a home and afford your monthly payments.
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Bad Credit Carries Penalties
Before you begin your search for a home loan with bad credit it is important to understand one simple fact: bad credit carries penalties. That is to say that although you can get a home loan with bad credit, you will need to come to terms with the fact that, in doing so you will be forced to accept the terms that come along with such loans. Namely, this means accepting a higher interest rate on your home loan and greater penalties should you fail to meet your payment obligations. Your bad credit is a black mark on your loan application and there is no way to come away from that black mark scratch free.
Three Strategies to Successfully Get a Loan
So now that you are aware of the problems that your bad credit score creates, you are ready to employ the strategies necessary to get the loan you need. These three strategies are simple to start today and will help you boost the appearance of your application in order to generate loan offers, despite your bad credit.
Strategy One: Know Your Score
This should seem self-evident, but you would be surprised at how many people go into the mortgage process with no clear idea of where they stand in terms of credit score. There is a huge range of FICO scores (numbers from 300-800) and therefore many degrees of "bad" and "good" numbers. You need to know exactly what your score is, what that means to lenders and why you score is as low (or high) as it is. This way you will be ready for any questions that lenders may have and may be able to make small changes today that can help improve your score quickly over time.
Strategy Two: Shop Around
Like any major purchase, finding a home loan is not as simple as walking into the first place that sells them and signing up. You need to shop around and talk to several lenders in order to compare the amount of money they will offer, the interest rates attached to that money and other details that will vary from lender to lender. You may also consider talking to a mortgage broker who, for a small fee, can generate several quotes for you.
Strategy Three: Save that Down Payment
There are really two factors that go into deciding who gets a home loan and who doesn't. First is your credit score. The second is the amount of down payment you have to offer. If you are lacking in one area, you need to make up for it in the other. Therefore, the key to getting a home loan with bad credit is in having a large down payment. Think, 20% of the purchase price minimum!
Getting a Loan
As you can see there are clearly ways that you can get a home loan with bad credit. Which strategies you use, and to what degree, will largely depend on your individual circumstances. This is why working with a lending professional is the key to success.
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