It is a common belief that it is difficult to obtain a homeowner loan because lenders have become very strict when it comes to bad credit borrowers. There is not much confidence these days that homeowners with bad credit will be able to secure needed financing.
This is not a valid assumption, however. Despite having poor credit ratings, homeowners can still get approved for large loans. This is due to the increasing number of lenders who are specialists when it comes to bad credit lending. These lenders are in the business of lending money to people with poor credit scores.
It is even possible to obtain a homeowner loan today if you are a renter or a tenant. All you need is some assets. As with all financial decisions, you must weigh all sides before you decide to apply for a homeowner loan.
Homeowners Have an Advantage
Given the choice among bad credit borrowers, a homeowner has a huge advantage. The home is a valuable asset. This asset can be put up as collateral for a large personal loan. This gives the homeowner a distinct advantage over other bad credit applicants.
The key to this all is home equity. A mortgage does not have to be fully paid off before the homeowner has built up equity. Equity is the part of the value of a home that is not covered by the mortgage. If a homeowner is making payments that include paying off some of the principal, there will be an equity built up.
Home equity is a premium form of security. Large loans can be easily approved if they are less than or equal to the equity. Past and current financial problems are not a deterrent when it comes to obtaining large personal loans when there is home equity available. Loans as high as $ 100,000 are even possible.
Unfortunately, many homeowners are under water. This means that they owe more on their mortgage than the home is worth. For them, they are suffering from negative home equity. So, are they out of luck?
Unsecured Homeowner Loans
There is another option available to the renter and the underwater homeowner. It is possible today to obtain homeowner loans without providing any form of security. It is even possible to do this with bad credit. As one would expect, there are some conditions attached.
Secured loans are always the ideal loan for people with bad credit. If you failed on debt in the past, this is especially true. It is more unlicensed that large unsecured loans will be approved without security.
But it is still able to obtain an unsecured personal loan. As with all loans, income and affordability are the conditions that are looked at first by the lender. Bad credit scores are used to assess the risk of you not paying back the loan. As the result, you will be offered smaller homeowner loans with higher interest charges. There is a common limit of $ 25,000 when it comes to unsecured loans. A lender is much more likely to approve a smaller amount.
Do Your Research First
Luckily today it is more likely that a person with bad credit can obtain a loan. This is a great reason to seek such a loan to improve your credit reputation. The internet has become the greatest resource when it comes to obtaining a homeowner loan when you have bad credit.
Online lenders exist who specialize in bad credit loans. However, it is vital that you research their reputations since not every internet company is honest and some may even be scams.
If you take your time to verify the online lenders and evaluate their terms and conditions, you will improve your chances of obtaining the homeowner loan you are looking for.