Many people these days desire to own their own home and therefore need to apply for a home loan with a bank or other lender. However, one of the first things that any lender will do when you apply for a loan is check your credit history. If the lender finds that you have a poor credit history, he is not likely to grant you the loan that you need.
In cases when poor credit in the past is a barrier to loan shopping, there are still options through private lenders. These lenders who primarily work online specialize in bad credit lending and may be able to get you the home loan you need despite your poor credit in the past.
What Causes Poor Credit?
There are many different factors that go towards determining the credit score of any individual. Two of the biggest factors in creating a poor credit score, however are simple. The first is bankruptcy; the other is habitual late payments and credit line defaults.
Basically, by checking your credit score a lender is trying to determine whether or not you are a good candidate for a large loan such as a home mortgage. He wants to know that you have the means and the ability to repay him the money he lends you.
While bad credit in the past is not a fool proof method of determining who is and who is not a responsible borrower, but it is one of the only tools that many lenders have available. Therefore, if you are a borrower with bad credit, home loans are not easy to get. You will need to go that extra mile to prove to the lender that you have reformed your ways and are ready to take this home mortgage loan.
Building Your Case
There are three major factors that you can use to your advantage when it comes to convincing a lender of your reliability as a home loan candidate.
- Down Payment
The more money you can offer in good faith as a down payment on your new home, the more likely the lender will be to believe you have reformed your ways. By producing a large sum of money, you show your lender that you have the financial means and self-control to save up for this important purchase. This will go a long way in convincing him that you are ready for a home loan.
- Purchase Price
The next item that you can look at is the price of the home that you want to buy. Make sure that you are searching well within your means and that you are budgeted to make your home payments each month. Also, make sure that you have an independent assessment done on any property you want to buy. This will guarantee you that you are not paying too much money for the home.
- Look for the Best Deal
The final step you can take to get the best loan possible is to shop around with many different lenders. There are dozens of private lenders working online who specialize in working with bad credit borrowers. Get several quotes and go for the lender who offers the best terms.
Get a Home Loan with Bad Credit
It should be clear from this article that there is still hope for those with a poor credit history to find a home loan in today’s market. By understanding why your credit is poor and taking the steps necessary to get the loan you need, getting a home loan is really possible.
By Martin Fisher