You may have reached a point in your life where acquiring property – whether a new home or an apartment – seems inevitable. After touring several nearby homes and searching through a list of great condominiums, you find your perfect match. It’s big enough to house a family, comfortable and effortlessly well designed, and priced within the range you feel comfortable parting with.
As any would-be homeowner does, you fill in forms at your bank, seeking a mortgage in order to acquire the home and close on the sale. But there’s a problem – unlike other homeowners, you are unable to access a home loan due to your poor credit score. It’s a problem that can cripple the way you purchase property, severely limiting the availability of long-term credit for your purchase.
Unfortunately, hundreds of thousands of would-be homeowners are stuck in this situation right now, unable to purchase property due to a poor long-term credit score. Without access to any home loans, mortgages, or other long-term funding, they’re left unable to purchase their dream home, even when they’re absolutely sure that they could manage the expense of it due to their consistent income.
There are two solutions to this problem, each offering its own benefits and disadvantages. The first is to spend the next few years of your life rebuilding your credit score, taking out small loans which are used to rebuild a failed credit history and regain the trust of lenders. The second is to use a bad credit home loan with guaranteed approval to access home funding without any other processes.
In this guide, we’ll look at both options – the long-term solution, and the significantly less intensive and demanding option. Both have their advantages and disadvantages to homeowners – factors that could make them ideal, or far from ideal, for you as a property buyer. If you’re stuck in this situation and want to start acquiring property, read on to learn more about how you can access a home loan.
Let’s begin with the latter – using bad credit home loans with guaranteed approval to access credit without having to extensively repair your credit score. These loans are available from non-standard lenders, most of which are very different from their counterparts in banks and credit unions. They focus on a smaller amount of customers seeking home loans, and typically offer personal service.
They also tend to have higher interest rates and fee structures than a standard mortgage lender, a practice that’s due to the significantly higher risk of taking on borrowers with bad credit. Due to your poor credit history, you need to consider that you’re a risk to lenders – if a lender has little or no reason to believe that their loan will be paid back in full, they need to mitigate their own risks.
This is generally done by adjusting the fees applied to these high-risk mortgages, increasing both the interest rates and scheduled fees to a point where the loan – and in fact all loans, in the greater aggregate sense – are profitable for the lender. Because of this, you will have to deal with a higher fee structure than other borrowers – this is something that anyone with poor credit should know.
You’ll also need to pay additional upfront fees and management-related fees, many of which are significantly higher than those seen on a standard home loan. Again, this is a result of the lender attempting to manage and mitigate risk. As people seeking a bad credit home loan are on average, more likely to default, additional fees are required to balance out these risk-related expenses.
Unfortunately, these lenders are also often the least ethical of all financial organizations, largely due to the fact that they operate well outside the traditional circle of banks and other lenders. As such, it is far from uncommon for a lender to request their applicants to lie or fabricate information on asset levels or income. This is a very bad sign, and should signal that the lender is not a good choice.
These are all risks – often relatively high risks – and expenses that come as part of a bad credit home loan. A much more effective solution, both for your short-term expenses and longer-term financial health, is to rebuild your credit and seek a standard home loan. This can be done using small loans and cash advances, which are repaid on time to build a history of repayments.
Along with allowing you to access home loans at standard interest rates and affordable fee levels, this also improves your credit score for the long term, allowing you to invest in hundreds of high-level financial services that would otherwise be unavailable. With lower risks and bigger rewards, this is the option that we recommend for people having trouble finding a suitable home loan.
Despite their expense and potentially hefty interest rates, bad credit home loans with guaranteed approval are a potentially useful service. For those with poor credit, they’re often the difference between being able to purchase your dream home and missing out. However, they need the right strategy behind them, as a poor choice of loan can eventually turn into a major long-term issue.