Financing Options for People with Bad Credit
"Imagine settling into the dream home YOU choose and then working to buy it..."
Can you really get financing? Can it really be done?
If you want to finance a piece of real estate, you'll be needing a mortgage from the bank. Problem is, these lenders are traditionally finicky, and it can be difficult to qualify.
You may be turned down for a mortgage from alternative lenders as well, but there are things you can do to give yourself the best likelihood to qualify.
Although low scores are risky, not all lenders will turn their backs, some even specialize in such lending - Rule of Thumb: If you have been having trouble getting approved for bad credit personal loans, you probably won't qualify for a mortgage, in spite of the security.
If your personal finances are shaky, it may not be the right time to buy a house in the first place.
It may be a little unrealistic if you are looking to borrow bad credit home loans no money down. BUT... generally speaking the more sizeable a down payment, the more a lender will be willing to look beyond credit score.
Improve Your Chances to Get Approved
It is very important for new home loan borrowers to become familiar with certain common terms you will encounter when applying for financing.
Be an informed consumer and understand the lending obligation you are signing on to. Make sure you are familiar with these terms before you start comparing suitable financing options to buy a house.
Knowing what the banks look for and what you can ensure you are prepared before you apply.
Principal: The total amount of debt, the principle excludes interest and late charges remaining on a loan.
Refinance: Paying off your existing mortgage with the proceeds from new financing.
Variable rate loan: The interest rate on this financing fluctuates in response to changing market conditions. As the interest rate fluctuates, your monthly payments will be adjusted up or down depending upon your agreed upon terms.
LTV/LCR: LTV is an acronym for the loan to-value ratio while LCR stands for the loan-to-cost ratio. Both are terms used by various mortgage lending companies to determine the financing amount that a person is eligible for based upon the total cost of the property you intend to purchase.
Appraisal: A written analysis of the estimated value of the real estate prepared by a qualified appraiser.
Prepayment: Repaying the mortgage before the agreed date the loan was due. Be aware some programs can have a penalty for prepayment.
Penalties: Mortgages can contain numerous penalties like the above mentioned prepayment penalty, late payment fees, check bounce penalties, there are many. Creative financing can have even higher costs than usual to offset the increased risk. You can reference HUD online learning resource for more information: Mortgage assistance (HUD). Take the time to read the terms of your lending agreement and don't be afraid to ask for clarification of any item you are not sure on. Be aware and understand the mortgage documents to know all the fees and penalties.
Sales deed: The sale deed transfers the ownership of the property in exchange for a price paid or considered. This document is required to be registered but in most cases the title company will take care of this.
Be careful with the terms and conditions of your selected lender. Do not be intimidated, read it thoroughly before signing any lending agreement. Don't be bullied because of your credit score, there are loans designed for your credit situation and remember they are getting your business. You are in the drivers seat.
Clarify anything that does not make sense or does not look right, trust your instincts and choose the right mortgage with confidence.
You Deserve a Second Chance, Seize It
Ultimately, if you cannot get approved for financing, and you have tried all the mortgage alternatives and have taken advantage of any bad credit home loans first time buyer programs from your broker, it doesn't mean it's time to simply give up.
Instead, if you've tried everything to no avail, it may be time to speak with a bad credit advisor to put together a plan to fix your credit. Focus on removing the obstacle and return with better scores or in a more lenient lending environment to try again.
Don't give up on your dream of owning a home, simply regroup, create a plan to get what you want, and make it happen!