Getting Bad Credit Home Loan Approval

Obtaining a home loan with bad credit is so difficult that many people have the feeling that they will never be able to get one because of their bad credit report. Even when they take steps to repair the bad credit record also, getting a loan still remains as difficult as ever. Reason is that with each enquiry by a prospective lender, the credit score or FICO score goes down by 8-20 points making the prospective borrower further risky proposition for the lender. The question therefore is how to get bad credit home loan approval.

It is Difficult but Possible

Good news for people with bad credit is that while it is difficult getting a home loan with bad credit, it is not altogether impossible proposition either. There are some lenders who will still offer home loans despite the prospective borrower having bad credit score. Only cliché in the entire process is that the borrower has to pay higher interests and meet more difficult terms and conditions for getting the bad credit home loan approval.

Home Loan Approval After Foreclosure or Bankruptcy

Perhaps the most difficult time in the process of obtaining a loan comes after a foreclosure or bankruptcy on the part of the prospective borrower.

• While the period of filing of bankruptcy is seven years, the sting will remain in the credit record for ten years;
• Seniors can get better rates with conforming loans even with bankruptcy but will have to wait a minimum period of four years;
• In case of foreclosure, the FHA guideline is two years from the date of foreclosure and it means that one can qualify even with only 3.5% down payment;
• There are certain moneylenders who offer loans or mortgages only six months after the bankruptcy or foreclosure. But there are certain strings attached to it.

Stings that are attached to loan approved by hard money lenders are –

• Usually the down payment is very high at 20% to 35%;
• Interest rates are also very high in such cases;
• Loan terms are not favorable for the borrower;
• Most of the times there would be prepayment penalties; and
• Even subprime lenders are not offering 100% loan disbursement in such cases.

Improving One’s Chances

Certain ways are there using which a prospective borrower can improve his or her chances of getting bad credit home loan approval.

• Obtaining one of the major credit cards would help and it is not as difficult as one thinks getting such a card after bankruptcy either.
• Lenders understand that a bankruptcy gives one a fresh start as he or she starts with no debt to pay and at the same time such person cannot file bankruptcy again within the next seven years.

Other factors that will help improvement in the prospect of getting the bad credit home loan approval are steady employment, earning regular salaries or wage, self employment, down payment of 10% or more, and regular payment of all bills.