Monday, June 4, 2012

Pre-approved Home Loans With Bad Credit: The Wiser Choice

One of the biggest challenges for home buyers is not in finding the home they want to buy, but in having the finance necessary to complete the purchase deal. Often, home hunters know what they want but with mortgage approval taking anything from 60 days to 90 days, the chance to get it is lost. The availability of pre-approved home loans, with bad credit even a factor, solves that problem.

Knowing what can be safely borrowed before beginning the negotiations to buy a property is a useful thing. So, securing pre-approved loans places the borrower in a stronger position. The effort is therefore well worth it.

But there is a pre-approval process that has to be gone through, with credit information and copies of your credit report required before the mortgage lender can decide whether to grant the home loan or not.

Key Advantages of Pre-Approval

So, what are the advantages on offer to borrowers, and how difficult is it to get pre-approved home loans with bad credit? Well, the key advantage is that with pre-approval, a home hunter knows exactly how much they have to buy a home with. There is no need to hope that a mortgage provider will approve the required sum.

This not only helps in the negotiation, but ensures that the home hunting process is shortened considerably. There is no need to waste time viewing homes that are already more than the pre-approved sum. What is more, by securing pre-approved loans it is easier to get an agreement with a real estate agency, since they are more likely to sell to someone assured of the asking price than someone who must wait to confirm they have the finances.

The pre-approval process takes 60 days to 90 days, but with the confirmation letter provided before the search for a property begins, the early patience is worthwhile. The home loan is guaranteed, so the desired property can be purchased on the spot.

The Pre-Approval Process

Getting a pre-approved home loan with bad credit is no easier or harder than it would be to get a normal mortgage. It is simply a matter of acting earlier to secure the funds needed to buy the home that the borrower wants. But the process does require clear information, with personal and financial goals stated in a Letter of Intent.

Other information needed as part of the application is a Purchase Agreement (if your current home has been sold), confirmation of tax returns, and a breakdown of typical household expenses. But securing pre-approved loans also means providing a copy of your credit report. These can be sourced from one of the three rating agencies - TransUnion, Equifax, and Experian - and provides official confirmation of your credit status.

Also, bankruptcy papers are needed (if applicable), details on current debt and assets owned need to be verified. If successful, an applicant will receive written documents detailing the size of the home loan approved, the interest rate charged, the required down payment, and repayment terms.

Other Considerations

There are mortgage providers that specialize in pre-approved home loans with bad credit, but be aware that there are usually processing fees connected with pre-approved loans. They should cover administrative costs, closing costs, and appraisals, so there should be little or nothing extra to face once the deal is done. Basically, securing pre-approved loans makes sure everything is covered.

Closing costs are often an expensive aspect of buying a home, and includes such things as title deeds, legal fees, and document processing - everything needed to ensure the home purchased with the home loan is legally owned by the purchaser.

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