How to get a bad credit home mortgage

If you have got a bad credit history, it is possible to get a good refinancing home mortgage loan. The most important thing here, however, is being able to shop around and understand the requirements and limitations of the different lenders. Just like any other borrower, you also want to make sure that you get reasonable interest rates and an attractive repayment structure.

Looking for the best lender

Compare rates and the kind of mortgage loans being offered by different service providers. You must be in a position to compare price differences. You must make sure that you improve on your credit rating because this will greatly affect your quote. Some of the things you can do to improve your credit is paying off your debts on time and if possible buy things on cash. Do you have collateral? If you have a bad credit rating and you have collateral, you stand a better chance of getting an attractive home mortgage loan. You can get a secured loan with a lower interest rate and the lender will be willing to give you a higher amount of loan. Lenders will however look at the loan to value ratio, which is basically the ratio between loan amount and the value of collateral property.

Debt to income ratio

Lenders will also look at the debt to income ratio. They calculate this by adding your debt payments like your car loan, credit cards, consumer loans and they also include the loan that you are borrowing. The total is compared against your monthly total expenses. A favourable rate would be anything below 40%. If you have got a bad credit rating, then it may be difficult for you to get a low ratio. Affordability What is important at the end of the day is being able to tell whether you can afford the loan or not. The bottom line is that you get higher interest charges if you have bad credit rating. You may need to work on improving your credit rating first before you can apply for a mortgage loan so that you get an attractive deal. It is also a good idea to see a real estate agent before you can make your final decision.