Home Loans for People with Bad Credit
Credit scores are often overlooked until an individual wishes to apply for a loan and wants to gauge their eligibility. Unfortunately, even mistakes from a decade ago can come back to haunt a potential borrower. These events can often lead to what it commonly called a bad credit report – where banks will rate a potential borrower from 0 to 700. The higher the score, the more reliable the borrowing power and this can leave those with lesser scores struggling when applying for home loans.
Bad credit home loans
Fortunately there are still borrowing options out there for those that have low credit scores looking for bad credit home loans– although the availability of them will depend on several factors that banks will consider before lending money. Some of these options include:
Applying for a guarantor loan
A guarantor is an individual that can act to financially back an applicant with bad credit. By guaranteeing a loan, they will be accepting that, should the borrower be unable to meet their repayments, the bank will consider the guarantor to be liable to cover the costs associated with any repayments that are still due.
Working on a credit score
If someone realises early on that their credit history leaves a little to be desired, they might be in a position to dedicate several months (or even years) to improving their credit standing. A good way to do so is by taking out a small loan that doesn’t pose much risk and then meet the repayments steadily until it has been paid off. This might result in a minor loss from the interest repaid; but it can also act to boost a credit score simultaneously.
Seeking alternative finance
Although a home loan might be off the cards right now; some borrowers might find themselves in a position to take out other types of loans and financing options if they have a comfortable amount in savings to cover a deposit. Some banks might be willing to overlook a low credit score if the borrower can demonstrate that they’re willing to use a moderate to large sum of their own cash as a down payment.
These options might not be available to everyone with bad credit, but they can certainly be useful when attempting to receive a cash investment from a lender. Hiring a mortgage broker can be useful, as these financial specialists can often help to find cheaper home loans. With banks, there are situations whereby they can consider applications from those with poor credit scores – and knowing how to work around them can be very advantageous.
If you want to find out “How much can I borrow safely” then check out an online mortgage calculator which will factor your current income and expenditure.
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