It is difficult to get a home loan with bad credit because options are limited and borrowing is more expensive. If your credit is “less than perfect” then you are not completely out of luck, it is just that you will have to work a little harder to get a home loan with bad credit. Having no credit or poor credit is a major hesitation block to getting a loan because you are viewed as a high risk customer who might default and leave the lender holding a bag of worms.
What is a Bad Credit?
Your credit may not be as bad as you think. If you have been informed that your credit destroyed your chances of getting a loan then make sure that it is true. There may be errors on your credit report. Once those errors are fixed, then things may look very different to lenders and you would be able to obtain a home loan with bad credit . The term “bad credit” means different things to different lenders. One lender might turn you away while others are willing to lend. Don’t be afraid to shop around before deciding that your credit is a deal breaker. There are two things about which to be careful of in this process:
- Submit all of your applications within a short period of time so that you do not beat up your credit with too many inquiries.
- Apply only to respectable lenders such as banks, credit unions, and P2P lenders, predatory lenders will almost always give you a home loan with bad credit.
If your credit is truly bad, here are a few ways to try getting a home loan with bad credit.
Visit Credit Unions: –
Credit unions can be more willing to offer you a mortgage loan with bad credit. They are supposed to be smaller than large banks, but there is good chance that they will look at you personally. If you are able to deal with them in a proper way then there are chances that you would be able to secure a home loan with bad credit.
Try Peer to Peer Lending: –
Peer to peer lending services are another good option for getting a home loan modification with bad credit. Instead of borrowing from banks you can also borrow from individuals. They may be more sympathetic, but they are not looking to lose their money.
Tap Friends and Family: –
Most peer to peer lending sites give you a chance to borrow from strangers. However, if your credit is really bad, then your friends and
family may be your only option to get a home loan with bad credit. They know you and maybe they would be willing to take a chance. If you borrow from friends and family, then do it properly so everybody is protected, document the loan terms on paper and consider using a third party to process payments.
Use Collateral: –
If you are having trouble getting a mortgage loan with bad credit then you may need to put up security. By promising something of value your lender knows that you are serious and has a better chance of collecting some money. If you have equity in your home, then you can probably borrow against it, but there are significant risks.
If your home loan modification has been rejected or do not want to get stuck paying high, subprime interest rates, then here are some basic alternatives that you can consider.
A) -Use a Home Equity Line of Credit: –
The housing illusion left many of the homeowners having more than their home is worth, but if you have equity in your property, then you could get a low-interest, tax-deductible line of credit to spend any way you like. It is true that removing your home equity puts your property in danger if you cannot repay the debt. But, if you have reliable income and are disciplined about paying down an equity line, then it is an inexpensive option regardless of your credit score.
B)- Apply to Credit Unions: –
Credit unions are similar to banks, but are owned by their members, who typically have something in common like working in the same industry or living in the same geographic area. Credit unions are nonprofit organizations that pass along earnings to members in the form of lower fees and higher customer service.
C)- Appeal to a Cosigner: –
If you do not have a friend or family member who is willing to give you a home loan with bad credit than perhaps one with good credit would be willing to co-sign a loan with you. Someone who knows your situation and trusts your ability to repay the debt would probably be willing to take a chance on you. But you have to remember that if you do not repay the debt, then the creditor will look to your co-signer for full payment. Additionally, all the payment history will be recorded on both of your credit reports, which could be shocking for your co-signer if you do not hold up your end of the bargain and make late payments or default.
How to Get a Home Loan with Bad Credit? by Chris Hall