Many mortgage lenders do not usually give mortgage loans to people with bad credit although there is still a chance for you to get a mortgage. If you have bad credit you are considered a high risk and it can be difficult to get a mortgage loan. There are many reasons why lenders are not willing to deal with people with bad credit as discussed below. At the same time, people with bad credit must not loose heart as there is still light at the end of the tunnel.
People with bad credit are high risky
This is according to mortgage lenders. If you are failing to pay your bills and creditors on time chances are high that you will also struggle to pay a mortgage loan. To make the matters even worse, mortgage loans are usually higher than other monthly instalments you will be paying. A mortgage loan requires somebody who is financially responsible because you will still have other bills to take care of besides the mortgage loan.
High interest rates
If you take steps to fix your bad credit history you may qualify for a mortgage loan but it will be very expensive. Lenders will charge you high than normal interest charges and this again can be a very discouraging factor. You also tend to pay more in processing fees, pre penalty charges and other additional fees. There are however other things that you can do to lessen your burden.
Shop around and compare different deals
With your bad credit you can still shop around for a better deal, after thorough research you should be able to get a lender willing to work with you. In fact these days there are lenders out there who specialise and deal with people who have bad credit. Look at multiple quotes and choose the mortgage lender who offers the best deal at the most affordable rate. When you do your research you can easily get information and tips from different lenders, they will give you all the information you need on getting the best deal.
Getting a good deal is not easy
Although you may qualify for a mortgage loan you should know that the terms will be very unfavourable. You often get a lesser limit if your credit history is bad. There is still something else that you can do to increase your limit.
Increase your down payment
You can get a better deal by increasing your initial deposit, you can increase the down payment up to 10% if possible. Besides getting a higher limit from the lender you will also get reasonable interest rates.
Tips and comments:
Although it is difficult to get a good deal with bad credit you can improve you overall credit score in order to get a mortgage loan. You can pay off all outstanding accounts and inform the credit bureau. Your credit score must increase up to at least 630 and you can negotiate with lenders. All information that is not correct on the credit report must be corrected; this will greatly improve your credit score.