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Is It Possible To Obtain A Home Loan With Low Credit Score

By Michelle L Published 05/1/2010 | Finance

When I ask people this question the most common answer that I get from most of them is ‘no’. On the other hand, it is possible for you to get a home loan even if your credit score is low.

Many people do not think individuals with low credit scores can obtain a loan because they believe that only those with good credit can be sanctioned the loan. However, it is important for you to know that there are certain situations when a loan can be offered to a person who has a bad credit score.

So how can you get a home loan?

This will depend on the decision of the credit inspector. He is an individual who will decide whether or not your application for the loan will be approved. The inspector will assess your situation and this will help he decide whether or not to approve the loan. If the credit score of the applicant is low then he will have to make further inspection before he can come up with a decision.

There may be several reasons why the applicant has a low credit score and one of such reasons is that the he lost his job and as such, he could not make the payments on time. Another reason why he was unable to make the payments of time may be because he spent a lot of money on a health emergency. These are some of the reasons that the credit inspector will try to inspect before he makes a decision.

Generally, the lending institution may ask the applicant to give some kind of collateral security on the basis of which a home loan will be given to him.

The lenders will ask for securities when they feel that they can not take any kind of risk with the applicant. This generally happens when the lenders are afraid that they is a high chance of default and in order to prevent this from happening, the lenders will ask for securities so that they can take over the assets of the applicant.

If you have low credit but you wish to get a loan to buy a home, you should follow these tips:

  • Get hold of your credit file and go through it so that if there are any errors or wrong information there, you can get them corrected.
  • If there are any defaults that are still pending, you need to pay them off.
  • Make sure you do not go to those lenders that you have had defaults with in the past.
  • If you have any unsecured debts then you can consolidate them in to the home loan that you are thinking about getting. This way, you will be able to decrease your repayments.
  • You can also consider taking the help of a mortgage broker who has a good reputation in successfully helping people with low credit scores get loans.