People with a bad credit history experience a hard time getting approved for mortgages. They are at the end of the priority for the banks because of the riskier profile. At times, the interest rates and terms are unreasonable, that makes it extremely difficult to repay the mortgage.
There are certain ways by which you can convince the mortgage provider to accept the mortgage application. Here, we have mentioned some tips for people with bad credits to get a mortgage with favorable terms. Even a slight difference in the interest rate can have a substantial impact in the long run.
Increase the Down Payment
The down payment is an important factor for mortgage approval in the case of almost every lender. You should keep it as much as possible to increase your chances of receiving a fair deal. The amount will increase your initial equity and decrease the loan amount.
With a lower principal amount, the interest and installments will take a direct hit. It will reflect positively on your repaying ability. Experts recommend the down payment to be at least 20% of the property value, pay more to have odds in your favour.
Take Assistance for Down Payment
Not always you have enough cash reserve to make a bigger down payment than the bare minimum. This leads to borrowers settling for whatever the terms are offered to them only to pay more interest. The solution here is to take a short loan for the down payment to get the mortgage’s best deal.
There are plenty of lenders offering 24-hour loans in Ireland to the borrower. The thought of two loans may sound intimidating to some people. However, stress for a few months will save you thousands of pounds over the duration of the loan.
Select a Private Lender
Private lenders are a better alternative to the banks and financial institutions in terms of flexible eligibility. They understand the situation of borrowers more practically on a human level. On the other hand, banks take numbers and strict policies as the only way to define the eligibility of a person.
You can convince a private lender based on your current financial status. A regular income and collateral will serve the purpose to get a house mortgage or car finance in Ireland. There is no need to find a guarantor or pay the excessive interest rates if you are financially sound.
Show the Cash Reserves
Bad credit makes your credit profile riskier in terms of possible defaults for the lenders. One way to convince the lender is to display a cash reserve as an assurance for timely repayment. The lenders may trust you since you have enough money to make payments even during some financial emergency.
It is wise to use the extra amount as a cash reserve instead of a down payment in some cases. It contradicts the credit report to some extent. You will also have an emergency fund to help during the tough times.
Explain the Situation
Some of the defaults in the credit history are caused because of unavoidable situations. They do not define your financial intelligence and responsibility with the money. You can share genuine reasons by adding a letter to the application.
Lenders understand the situations when there is nothing the people could have done to avoid a default. Also, you can explain that the situation is now resolved. Try to convince them by shifting the focus on the current financial stability.
Take Help from a Co-Signer
Your partner with a perfect credit history can exponentially increase your chances of approval. They will be responsible for making the repayment if you end up missing them. Therefore, make sure they understand the risk before they sign up as a co-signer.
The benefits also involve lower interest rate and some flexible terms. You can ask a family member or friend to co-sign the mortgage. The mortgage will have no impact on their credit history if you make every payment on time.
Refinance
Even if you end up with a high-interest mortgage, you can always refinance it in the future. The new terms will be based on timely payments and future financial situation. Therefore, you will find a better deal, even if the current one is financially draining.
Look Around
Do not blindly accept the first offer you receive for the mortgage. Many lenders in the market offer house mortgage to borrowers with bad credit. Compare the interest rates and terms before you make any decision.
You should apply to multiple places at once. Every hard enquiry of the credit report will create a negative impact on it. It simply shows you as a desperate borrower.
Display Other Credit Details
Many other details that signal you as a responsible borrower get no mention in the credit history. These details include your rent history, utility payments, and cell phone bills. While there is no guarantee on it but they might help you convince the mortgage provider.
To sum up, a mortgage with reasonable interest rates is still possible if you have a bad credit history. The right strategy and some short time stress can help you significantly cut the overall cost. Follow the above tips and search the market to get the best deal on home mortgages.