Poor Credit Mortgage Loans: Factors Affecting Your Borrowing Capacity

Poor Credit Mortgage Loans


Are you planning to buy your dream house?  Remember that your borrowing capacity depends on various factors. Whether you’re planning to apply for poor credit mortgage loans (bad credit loans) or a regular mortgage, here are a few factors that may affect how much you can borrow.

Credit score

As mentioned above, the higher the score, the better is your chance of getting a loan. Financing companies give preference to borrowers with good credit history. So, if you have been reliable in paying your utility bills and outstanding debts on time, lenders may quickly approve your loan. But, if there are records showing that you are having troubles in paying your financial obligations, they may not be eager to approve your loan application immediately.

The better your credit history, the better are your chances of enhancing your borrowing capacity. But, there are reliable financing companies like NSW Mortgage Corp that can help you get the mortgage you need despite your poor credit file.

Employment status

That means lenders will ask about your length in service, the type of job and companies that you worked with and your regular income. They may ask for employment records and ask questions pertinent to your job moves. So, if you have been hopping from one job to the next or if you have been laid off for a while and got employed recently, they may inquire about it. Remember that lenders are fishing for evidence of your ability to repay the loan. So, the longer your employment and the higher your income, the better are your chances of getting a mortgage.

Financial commitments

Do you have unpaid utility bills and rent? What about credit card debts, personal loans, business loans and an existing mortgage? Even unpaid hospital bills and your debts to peers and relatives count. Lenders will also look at your daily and monthly expenses or other obligations that may negatively impact your repayment ability.

Living expenses

How much is your daily expense? What about your monthly and outgoing living costs? If you are earning $2000 a month but you spend $1500 on utility bills, credit card debts, school and childcare costs and rent, it means that lenders will only consider the remaining $500 as your free money. They will take into account any expense that can reduce the amount of money for your monthly repayment. Consequently, if you are seriously considering getting poor credit mortgage loans, make sure that you free up some of your monthly budgets to give way to your monthly repayment. For example, you can cut down on some monthly subscriptions. Lenders can see that you have enough money for the monthly repayment.

In short, lenders are looking for proof of your surplus income to pay your loan.  But, if your living expenses are higher than your income, lenders may not approve your application because you have a strong tendency to miss payments.

Cash flow

How much money comes in and goes out of your pocket? If you want to know if you can afford the repayments of a certain loan, make sure that you have a practical understanding of how much money you have and how much you spend on a daily or monthly basis. You can create a spreadsheet to track your income and expenses.

It is also advisable to request for a credit file to learn more about your outstanding debts and trace the penalties, charges and other fees that may affect your credit score. In the same way, your credit history can help predict your spending pattern and your borrowing habits. Lenders are interested in what you have. That includes assets like real estate, gold, mutual funds, businesses and other investments that are potential sources of income. They want to know their value and your ability to use them especially in case of default.

Home equity

Having equity in an investment property or with a shared portfolio can significantly boost your borrowing capacity. But, large debts like car loans, business loans and equipment loans and other assets have a huge impact on the lender’s decision and they can potentially reduce your borrowing capacity.

Good credit means you have better chances of improving your borrowing capacity. But, even if you have a poor credit score-it doesn’t automatically mean that you are not reliable at repaying your loans. You may have experienced some repayment troubles but poor credit mortgage loans (bad credit mortgage loans) can clear up any negative marks against your score, only if you use it the right way.

Learn more about the latest mortgage loans available for you at NSW Mortgage Corp today!

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