Mortgage Approval with Bad Credit

There are many ways of paying for a new home. There are also alternatives to buying such as renting or leasing. But what most people still report as their ultimate goal, is to own their own home, and the most common way of getting started with this goal is to get a mortgage.

There are many different types of mortgage but they all have one common feature, they are secured over your home. This means that if you ever become unable to meet your repayments, your home can be seized by the bank who can then sell it in order to get back their principle.

When you’re shopping around for a loan, there are certain terms you will need to be familiar with. For example, mortgages generally come as either a fixed rate mortgage or a variable rate mortgage. The fixed rate loan will keep the same interest rate and monthly repayment for the whole lifetime or term of the loan. This will generally be for a period of 10, 15, 20 or 30 years. If the rate is fixed for a period, such as the first 2 or perhaps 5 years, and then reverts to a variable rate it is known as an adjustable rate mortgage or ARM.

This is where bad credit can start to cost you. The rate at which you are offered a mortgage will depend on a number of factors. Of course the main one will be the prevailing interest rate in the economy, but factors such as where your home is, what sort of home you are buying, how long the loan is for and your income will play a part. Your credit rating will influence the rate at which you are offered a mortgage, and if you have bad credit it may mean that your mortgage is at a higher rate, or that you will not be offered a mortgage at all.

If you find that you are not offered a mortgage there are a number of things you can consider doing. The easiest would be to rent or lease a home, but this is not always an option, and if you had your heart set on buying a home, it may not be acceptable. You may consider borrowing less, and buying a cheaper home. This should be easier to get approval for. You may also consider saving up for a larger down payment. This will also make approval more likely. The main thing you should consider however, is working on fixing your ailing credit score by getting your debts under control and making your repayments on time.