It is really difficult to apply for a home loan if one has a bad or no credit. Looking for money to buy a house is not easy, especially if you don’t make financial arrangements to budget your money. However, there are methods or steps that you can follow to get the requirements needed for getting a home loan.
One should be knowledgeable between the difference of a secured and unsecured loan. Getting a home loan is considered a secured loan. The large amount of money lent to you by an institution requires that you submit a collateral that will secure your loan. In case you can’t repay the amount that was lent to you on time, your collateral will be their assurance.
Home Loan and Your Credit Standing
Always bear in mind that your credit standing affects your eligibility to apply for any kind of loans – most especially a home loan. For this reason, a person is advised to take extra step to maintain his credit standing right from the very beginning. Having a high credit score makes it easier for one to apply for a home, car or business loans.
Having said this, you must be aware that getting a home loan is not easy, as this requires a lot of time and effort. The more it becomes difficult if you, the homeowner, does not have a good credit standing. For sure, loans with low interest rates are harder to apply for.
What then Should You do?
First, you have to search for lenders who offer mortgage loans for bad or no credit. Prepare and hand over an application letter that is presentable and easy to understand. House and credit history should also be presented to the lender for him to review your banking history. The application letter also includes the date and the methods of repaying the loan that you are planning to apply as well.
Expect that credit companies offering mortgage loans to people with no credit or bad credit standing will have higher interest rates and steeper rules and regulations. The good news is, even with a not-so-desirable credit score, you can still apply for a home loan. Although there may be some who won’t accept your application letter because of your bad credit history, but this does not mean that you have to stop applying for the said home loan.
What should you do if your home loan application is rejected?
Do not be afraid to ask why your application letter was rejected. If the reason is because you have a bad credit standing, then you will have to come up with ways on how to improve your credit score before getting a home loan.
- You have to improve the way you handle all your loans, credit card bills and utility payments.
- You have to pay on time.
- If you can manage to save money in your bank account for a certain period time, this would be an advantage to you when the time comes you apply for another home loan.
- Try to maintain good credit standing for the next 6 months or until you see a significant increase in your credit score.
Some people take advantage of mortgage loans with high interest for the time being – just so they can show credit companies that they are able to handle their credit better.
During this time, avoid purchasing expensive and unnecessary things. Save your money and pay debts on time. Rebuild your credit history with a secured credit card. Most of all, never pay a debt by taking on another debt. There are lots of people who can help you rebuild your credit history. They will help you how to make financial plans so as to handle your payments and money systematically.
Getting a home loan even if you have bad or no credit is possible. However, you need time and strict discipline on your part to rebuild your credit standing so that lending institutions are willing to take the risk and approve your home loan. Is it possible? Yes it is!
March 8, 2014 6:19 pm
As a mortgage broker I commend you on this post. It’s very sound advice for those who may have veered off the ‘Good Credit’ tracks. Some loan promoters make it sound easy to obtain credit when your credit is bad. However, as you say, it’s easier said than done.