Bad credit situation makes you prone to every glittery and fake commitment on mortgage. Relieving words of the lenders and their almost unshakable promise of providing you guaranteed approval looks so promising. However, if that does not happen, and you get a rejection, only God can explain your pain. It stuns you a lot. Isn’t it?
Practically, it is not possible to get surety of approval on a mortgage for a poor credit scorer. Then what exactly is the reality behind this? If you want to buy a property and have poor credit, it is better to interact with the truth. Best is to remove all the myths and play safe to get on the property ladder.
GUARANTEED acceptance is JUST an advertising term
You know how abundantly mortgage lenders are available in the market. They are in a cutthroat competition to win the customers. The competitors always threaten their presence in the industry.
We humans today live in a world of consumerism. Those who sell the solutions for those desires need to say something to attract the customers. To stay in the race, lenders advertise in varied ways. They focus on your weaknesses. They first ask you ‘Can you get a mortgage with bad credit?’ and then give a reply ‘Yes you can get a mortgage and that too on guaranteed approval, Apply now’. Looks interesting right?
The world knows, what a bad credit mortgage applicant yearns for most. Yes, approval. However, there is no doubt that it is possible to borrow funds despite the bad credit. But that demands a series of formalities and after that too approval may not come.
The actual game works on varied factors and not only on credit rating
It does not matter what a lender is giving you despite a poor score. Every lending company considers other factors, too, besides the credit score performance. Without that, you cannot cross the qualifying parameters. Here are the aspects that come under consideration –
Repayment capacity in the mirror of debt-to-income ratio
No mortgage company can deny the importance of debt-to-income rate. Minimum 60% income and 40% debt is acceptable to give a yes to a borrower. In the case of weak payment history, the applicant is expected to keep the 70:30 ratio.
Additional income becomes decisive
Of course, no matter how big is the dream a mortgage company offers you on approval. In the end, it cannot compromise on risk part. It wants you to be active in your financial capacity. In case, the lender is not convinced with your debt-to-income ratio, and it may ask you to present any additional income.
Recent financial behaviour
Poor payment history has no revival, as it is the past but the recent and current financial behaviour can be tailored. You need to show improvement in your fiscal practice to show the possibilities of betterment in your finances.
• Pay the bills on time
• Do not take any new loan to keep the creditworthiness strong
• Keep the savings adequate
• Put money in some lucrative investment products
• Do not reach to the maximum limits of credit cards etc.
Do not expect ‘no credit check’ it is actually a soft credit check
Another assurance that comes on the assured approval on a mortgage with bad credit score is of no credit check. It is just a jargon of the mortgage industry that is used to attract fund seekers with weaker payment records. In reality, it is the soft credit check in which the lender goes for the credit record perusal, but it leaves no search footprint.
Next time if you see anything like a mortgage with guaranteed approval stay rational. You need to qualify on your repay capacity, and no promise on approval made by the lender can do that.