Buying a home can be a complicated process, but there is no doubt that the central requirement of any purchase is the mortgage. The good news is that it is possible to get a home loan with bad credit, though the terms may not be ideal.
But even for those with excellent credit histories, securing the necessary funds to close a deal can be a problem. The approval process is lengthy, and opportunities are frequently lost. When a dream home is found, it may not be off the market by the time the funds come through.
For this reason, pre-approved mortgages are growing in popularity. But there are several factors that should be understood before jumping whole-heartedly into the home loan approval process. Here are just some of them.
Understanding Mortgage Pre-Approval
The task of securing a home loan with bad credit is not simple. For any kind of loan, there are a number of conditions that have to be satisfied first, and with bad credit the conditions are a little more. When it comes to mortgages, the size of the loan ensures that more scrutiny than usual is applied before approval can be granted.
The problem is that this takes time, typically between 60 and 90 days. And when it comes to buying a home, that delay can be detrimental with real estate agents happy to sign over a property to the first person that can hand over the money. But getting pre-approved mortgages removes such worries.
Basically, by securing the home loan in advance, the real estate agent is assured the funding is there, so the property deal can be closed with confidence almost immediately. The approval process is still 60-90 days, but home hunting takes place after approval is given.
The Mortgage Approval Process
It might seem that an approval process that takes as long as 90 days to compete is perhaps unnecessarily detailed. However, there is very good reason for the lengthy period. Getting a home loan with bad credit requires patience since every little detail is examined.
For example, while the approval process for a personal loan may involve a credit check, this is only the tip of the iceberg when a mortgage of perhaps 0,000 is being applied for. The mortgage provider will also examine financial and income records over the previous 5 to 10 years, seek a detailed breakdown of the credit report and assess the ability to meet the required repayments in the long term.
The process involved before granting pre-approved mortgages is no different. The chief benefit, however, is that pre-approval means home hunters can approach real estate agents fore-armed with confirmation that a home loan is approved and the funds are ready to be transferred.
Advantages of Pre-Approval
As already mentioned, the chief advantage to being pre-approved for a mortgage is that the home hunter enters negotiations in a much stronger position. The time taken to secure a home loan with bad credit would normally be a window where a deal can be lost.
However, the strength of the position adopted with a pre-approved mortgage is such that even major savings can be made on the purchase. In many cases, sellers offer discounts when payment is made within a set period of time.
Another advantage is that pre-approval confirms the maximum home loan fund available. So, a lender will grant 0,000, but if a home is found for 0,000, interest is charged only on the sum spent. Regular mortgages are a fixed sum.Home Loans With Bad Credit: The Advantages of Securing Pre-Approval