Applying For Bad Credit Home Loans - The Dos And Don'ts
Most people in bad credit situations are usually happy to get approved for any loan and do not take the time to research about what they are getting themselves into. Even with bad credit you still need to be cautious and not rush into anything. Before applying for a bad credit home loan, take the time to go over the dos and don’ts listed below.
Do - obtain a pre-approval before you start looking for a home. By obtaining a pre-approval beforehand means that you have been approved for a certain loan amount and it is okay for you to start looking for your dream home within the amount that was approved.
Don’t - take the service from a lender that was referred to you by your realtor. In most cases, realtor will refer their clients only to lenders whom they have a business agreement with. This may not be in your best interest and you may not get the best bad credit home loan offers. You should shop around for lenders or ask someone you know and trust to give you a referral.
Don’t – apply for or open any new credit during your bad credit home loan process, this can affect your credit score and could cost you the approval of your application.
Do - Use credit to get credit. Buying everything with cash will not help you to rebuild your credit score but it is definitely a smart choice. However, if you want to rebuild your credit you have to get credit and use credit responsibly to rebuild your credit score.
Don’t – make any unnecessary credit inquiries on your credit report, this too can affect your credit score and reduce the loan amount you will qualify for.
Do – Get a copy of your credit report from the major credit bureau: Equifax, Experian and Trans Union. Go over your credit report very carefully, making sure that they are free of mistakes. Credit reports frequently have mistakes, such as accounts are still open or overdue, when in fact they should be closed. If you find any mistakes you need to contact the credit bureau immediately and get the corrections made. Any errors on your credit report can decrease your credit score and affect the outcome of your loan.
Don’t - make any big purchases during the bad credit home loan process - this can affect your credit score and the outcome of your loan process.
Do – save as much money as possible for the down payment – putting a large down payment will reduce your interest rate.
Do - make all outstanding credit payments on time, including rent, utilities and credit cards.
Don’t - max out your credit cards. Maxing out your credit cards will hurt your credit score, so stay within your credit limit, make timely payments and only buy what you need.
Although bad credit home loans are readily available to you, you need to keep in mind that you will not qualify for the best interest rates available, but doing your research and knowing what to expect can save you thousands of dollars in the long run. And best of luck to you on your home purchase.