It would be foolish to believe that income alone is all that is needed to get a loan approved. There are several other factors lenders pay attention to in an effort to ascertain whether a loan is affordable to an applicant or not. Since bad credit is not so influential, even getting mortgage loans with bad credit is possible.
Credit ratings definitely have a limited influence in the approval process, but if the other factors are in order, then lenders are willing to take the risk. With that in mind, there are clear steps that every applicant can take to improve the chances of securing fast approval.
In fact, when applying for a mortgage loan there are three steps worth taking. Between improving the state of your debt, carefully maintaining a budget, and saving a down payment, these steps help towards a successful application.
Sticking to a Budget
It does not take a genius to work out that preparing a budget is a key step before apply for a mortgage loan with bad credit. With a limited income, and existing debts to worry about, it is essential that available finances are shared out properly. But it also reveals the maximum possible mortgage to apply for.
Having a budget calculated means noting all of the existing debts, monthly outgoings and other expenses, and matching them against the monthly income. But the advantage is not just in learning the state of your own finances, but in showing lenders just how serious your efforts are. Impressing them, as well as meeting their criteria, makes securing fast approval more likely.
However, they look for mistakes in your calculations. For example, whether the debt-to-income ratio meets its limit, with a maximum 40% of available income committed to repaying debts. Failure to take this into account will see the mortgage loan application rejected.
Lower Your Debts
Securing mortgage loans with bad credit is certainly not the impossibility that some people seem to think, but that is not to say low credit ratings have no influence in the application process. The fact is that the lower the rating, the higher in interest rate charged. But, clearing some debts in advance can benefit an application in two respects.
The first is that the overall debt is lowered, so the debt-to-income ratio is improved. And the second is that the lenders are impressed that such a proactive strategy has been taken. It tells them that the applicant has a mature attitude and is serious about securing fast approval.
These debts can be cleared through a consolidation loan, taken out to buyout the balance of each debt, and replace them with a single, more affordable monthly repayment. This frees up extra cash, increasing the available excess income with which to repay the mortgage loan.
Save a Large Down Payment
A down payment is much more than simply a deposit placed on a property to seal the deal. In fact, it has a definite affect on the size of the loan needed. When applying for a mortgage loan with bad credit, lowering the required sum lessens the debt, as the principal owed and the interest to be paid are both lowered.
When the figures are examined, it is easy to recognize the extent of the advantage. If a down payment of just 5% of a $200,000 home is made, then the $10,000 payment can mean savings of $50 per month. That translates to $17,000 if the term of the mortgage loan is 30 years. When the application is in good order, securing fast approval is made a little easier.