How to Get Pre-Approved With Bad Credit for a Home Loan

When you find the perfect home, it is important to secure a pre-approved home loan. A credit rating plays a big part in obtaining a home loan, and having a low credit score will negatively impact your ability to get a home loan. However, it is still possible to become pre-approved for the home loan, you just are not going to be approved for as much as someone with a high credit score.

Save up a down payment. It is extremely important to have a down payment. If you do not have more than 10 percent of the home's value, you are required to pay an additional mortgage insurance. This increases the monthly payment of the home.

Locate back tax returns for at least the previous two years. This shows how much money you are making (the home loan individuals typically add the two tax returns up and divide them by two to obtain an average yearly income).

Include any other monthly payments you make, including school loans and car payments.

Fill out the initial loan information and submit it to the loan providers. It is best to apply for a home loan through a bank or credit union that you are a part of. Financial institutions are more likely to give out money to individuals they know.

Wait for the results. It may take a few days to hear back from the financial institution. You are likely approved for the home loan; however, due to the bad credit rating, the interest rate is higher and the amount you can purchase is lower.

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Learn how this simple step could help you get the home you want.

When you’re starting to get serious about house hunting, getting pre-approved* by a mortgage lender can be a smart move.

First and foremost, you’ll know in advance exactly how much you can borrow, so you won’t waste time looking at out-of-reach properties. You’ll be able to better estimate monthly mortgage payment so you can budget around it. Plus, it shows real estate agents and sellers that you are serious–which can give you an advantage over other buyers.

Get your documents ready for pre-approval.

A pre-approval is a written commitment from a lender that you qualify for up to a specific loan amount based on your income and credit information. To get pre-approved, be prepared to provide:

  • Recent pay stubs – usually for the previous two or three months
  • If you are employed, W-2s and federal tax returns for the past two years
  • If you are self-employed, two years of business tax returns, profit and loss statement and a current year-to-date balance sheet. If a current balance sheet is not available, business banking statements may be acceptable for a Sole Proprietor.

  • Two to three months of recent bank statements, and other investment and savings statements
  • Contact information for your landlord (if you rent)
  • Your divorce decree if applicable
  • The lender will also analyze your credit report (for you and any co-applicant) to determine if you qualify and what rate you may be offered. Having an average or better credit score will work in your favor. Learn more about your credit score.

    You can often get a commitment letter in as little as 48 hours.

    Get approval in as little as 48 hours.

    Once your paperwork is complete, you can often get a commitment letter from your lender in as little as 48 hours. Most pre-approval letters are good for 60-90 days. If you need more time, your lender will most likely pull a current credit report to make sure your financial situation hasn’t changed.

    Don’t give up if you don’t get approved.

    Reasons for being denied usually fall into two areas—credit and income— and the lender will let you know why you weren’t approved. Before you reapply and depending on your specific denial reasons you may want to:

    • Correct any errors on your credit report, and shoot for getting and staying in the average or better range. (see how to improve your credit score)
    • Pay down as much of your debt as possible.
    • Consider increasing your down payment to help you qualify for the loan amount you want.

    Get started now.

    Whether you just started looking for a home or are well into the hunt, getting pre-approved is a great first step. To learn more about PNC’s simplified pre-approval process and get the ball rolling, just contact a PNC Mortgage loan officer.

    * Pre-approvals are subject to property underwriting and appraisal. Borrower must satisfy pre-approval conditions outlined in commitment letter. Loan amount subject to property appraisal.

    Pre-approval means you’re qualified for up to a specified loan amount based on your financial situation.

    pre approved home loan chase

    A mortgage preapproval letter can put you head and shoulders above other buyers who may be interested in the same home as you. Getting preapproved will help you find a mortgage lender who can work with you to find a home loan with an interest rate and other terms suited to your needs.

    NerdWallet has researched the major national mortgage lenders to help you quickly find the best one. We recommend comparison shopping with at least three lenders to get a complete picture of your options.

    Why should I shop multiple lenders?

    In a 2015 report , the Consumer Financial Protection Bureau found that 77% of consumers apply to only one lender when seeking a mortgage. By shopping just three different lenders, borrowers could save more than $3,500 in just the first five years, according to the CFPB’s research, and, in one example, enjoy payments that are nearly $60 less per month.

    By applying to several lenders rather than just one, you can compare all-in costs and get the best deal.

    What is a mortgage preapproval and why does it matter?

    A mortgage preapproval letter shows that a lender has evaluated your financial history and figured out how much of a loan you can qualify for. Consulting with a lender early in the home buying process is important so you can get a sense of your true budget, talk about different loan options and spot any potential issues with your credit profile in time for you to course-correct. Once you know your budget it will be easier for you to shop within your means and find a home you can afford.

    A preapproval letter shows you’re a serious buyer and can be the key to closing on your new home because when you’re ready to make an offer, the seller knows you have financing ready and you’ll be able to go through with the sale, which makes you a much more attractive buyer.

    Home loan conditional pre-approval

    At ANZ we can conditionally pre-approve your home loan - so you can look for a home with confidence.

    The benefits of a conditionally pre-approved home loan

    A conditional home loan pre-approval is free and there’s no obligation – but it has a lot of advantages:

    • You can borrow a specified amount of money to buy a home, subject to satisfying some specific terms and conditions – for example, the type and value of the property you want to buy.
    • It shows real estate agents and sellers that you're serious about buying.
    • It puts you in a better negotiating position – having your finance already arranged makes your offer more attractive and helps speed up the process once you’ve found a home you like.
    • It means you can bid at house auctions – auction bids are unconditional, so you need to have your finance arranged before you bid. (Before you bid on a property, you’ll need to inform us so you can ensure you’ve got the all the correct information.).
    • When you get a conditionally pre-approved home loan from ANZ you’ll also get an E-Valuer reports from QV to help you look for a home and make an informed assessment of how much a property may be worth.
    • You can start the application process online or apply at your local branch, through one of our mobile mortgage managers or by calling 0800 269 4663.

    • It’s valid for up to 90 days (depending on your situation and how much you want to borrow).
    • Once you’ve found a home, we will confirm that it meets the conditions, and then provide unconditional approval for your loan.

    Applying for a conditionally pre-approved home loan

    You will get a free QV E-Valuer report with your conditionally pre-approved home loan from ANZ. An E-Valuer report gives you an instant estimate of a property’s market value plus recent comparable property sales in the area to help you make an informed assessment of how much a home may be worth.

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    ANZ lending criteria, terms and conditions and fees apply.

    This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you would like to speak to an ANZ Authorised Financial Adviser, please call 0800 269 296.

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