Buying a Home With Bad Credit - Getting Pre-Approved with Poor Credit
When buying a home with poor credit, a pre-approval letter from a reputable mortgage lender is worthwhile to have. Although some mortgage lenders favor borrowers with high credit scores, numerous lenders specialize in poor credit mortgage loans. They offer a range of home loan programs for every situation, and pre-approval letters which enable you to start bidding on homes.
Purpose of a Pre-Approval Letter
Although having a pre-approval letter is not required prior to bidding on a home, many realtors and home sellers will not accept bids unless the potential buyer has been pre-approved. For the most part, getting pre-approved saves time. Beside, if a home seller is eager to sell their home, they want to avoid dealing with persons who may, or may not be able to secure financing.
When contacting a realtor to tour a home that is listed for sale, the first question out of their mouths is usually, "are you pre-approved?" If not, they will likely encourage you to meet with a mortgage lender.
Benefits of a Pre-Approval Letter
Pre-approval letters are useful because homebuyers become aware of home prices that fit comfortably into their budget. Thus, they avoid visiting neighborhoods or inquiring about homes they cannot afford.
All homebuyers will benefit from a mortgage pre-approval, especially first time buyers. Also, if a potential buyer is pre-approved, some motivated sellers are willing to negotiate or reduce the price. Moreover, if a buyer is pre-approved when their bid is accepted, this usually means a quicker closing.
How to Get Pre-Approved for a Home Loan
Homebuyers may get pre-approved for a mortgage loan in-person or using an online lender. Before completing an application, be sure to obtain at least four no-obligation quotes from lenders. This way, you choose the lender with the best mortgage offer. Next, complete a pre-approval application. This will include supplying tax information from the past two years, current employer and income, and a credit check.
The majority of pre-approvals are quick. Once buyers receive information on the maximum loan amount they can receive, the lender will issue a pre-approval letter. There are various loan programs available; thus, buyers may qualify for different amounts. For example, if selecting a 30-year fixed, buyers may qualify for $185,000. On the other hand, if opting for a 5-year interest only option, they may qualify for $250,000.
Our Recommended Poor Credit Mortgage Lenders:
Mtg Lenders For People With Credit Problems:
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When applying for a bad credit mortgage loan, make sure you are current on your existing credit lines. You will want your current credit to be as good as possible.
Also, make sure to include all the income you have. If you have any equity in any stocks or other financial accounts, make sure to mention that to the broker as well.
The more money you can put down on the loan, the more likely it is that you can get approved. FHA loans usually only require 3-5% down. They are also usually open to working with people with credit problems.
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