A number of elements are often looked at when it comes to property sales, especially when you are seeking some form of financing for the property. Lenders will consider various factors such as your assets, income, credit scores and liabilities to decide whether or not to finance the purchase of the property. Higher credit scores will usually give you a better chance at being approved for property loans. However, having a poor credit score does not automatically disqualify you from being approved for a loan. You can still get a loan to purchase property even with bad credit. Here's how.
Make A Larger Down Payment
If you have bad credit, one way to increase your chances of being approved for a property purchase loan is increasing your down payment. In fact, this may be your only option at purchasing the property. Therefore, save up enough amount for the down payment. The logic behind making a larger down payment is that by increasing your investment in the property, you are reducing your likelihood to default, which means you will be minimising the risk to the lender.
Although not easy, larger down payments can give you an edge in terms of negotiating the interest rates on your financing or loan. This would be beneficial because with, bad credit, lenders will charge you higher interest rates to minimise their risks.
If you have less money to make larger down payments, consider liquidating some of your other assets. Retirement accounts are oftentimes ideal for such purposes, but make sure you have a feasible financial plan that will ensure you don't end up making huge losses in the process.
Consider A Co-Signer
Some lenders accept co-signers. Co-signers are individuals with whom you can borrow the loan. For a co-signer to be accepted by lenders, their credit scores should be good. In addition, they must have a higher income than yours, so keep this mind when looking for one. Co-signers with excellent credit scores or relatively higher incomes may even help you get some favourable terms on your loan, especially on interest rates.
However, co-signing a property purchase should only be done if you can repay the loan on your own. That is, you need a stable income and you should be working on improving your credit score by avoiding late payment of bills and repaying previous debts, etc. This because defaulting will affect both of your credit ratings.
For more information on financing a home, contact a real estate agency, such as Carter Real Estate.